<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13D
UNDER THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. N/A )*
----------
Socket Communications, Inc.
- -------------------------------------------------------------------------------
(Name of Issuer)
Common Stock
- -------------------------------------------------------------------------------
(Title of Class of Securities)
833 672 108
------------------
(CUSIP Number)
Kurt Sjoblom
Cetronic Aktiebolag (Publ)
Kungsholms Strand 147
SE-11428 Stockholm
Sweden
- -------------------------------------------------------------------------------
(Name, Address and Telephone Number of Person Authorized to Receive Notices and
Communications)
January 29, 1997
-------------------------------------------------------
(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
schedule because of Rule 13d-1(b)(3) or (4), check the following box [ ].
Note: Six copies of this statement, including all exhibits, should be filed with
the Commission. See Rule 13d-1(a) for other parties to whom copies are to be
sent.
*The remainder of this cover page shall be filled out for a reporting person's
initial filing on this form with respect to the subject class of securities, and
for any subsequent amendment containing information which would alter
disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be deemed
to be "filed" for the purpose of Section 18 of the Securities Exchange Act of
1934 ("Act") or otherwise subject to the liabilities of that section of the Act
but shall be subject to all other provisions of the Act (however, see the
Notes).
<PAGE>
SCHEDULE 13D
CUSIP No. 833 672 108 Page 2 of 18 Pages
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NAME OF REPORTING PERSON
1 S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Cetronic Aktiebolag (Publ)
- -------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [ ]
(b) [ X ]
- -------------------------------------------------------------------------------
3 SEC USE ONLY
- -------------------------------------------------------------------------------
4 SOURCE OF FUNDS* WC
- -------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDING IS REQUIRED PURSUANT TO ITEMS
2(d) or 2(e) [ ]
- -------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION Sweden
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NUMBER OF 7 SOLE VOTING POWER 1,700,000
SHARES
BENEFICIALLY ----------------------------------------------------------------
OWNED BY 8 SHARED VOTING POWER
EACH
REPORTING ----------------------------------------------------------------
PERSON WITH 9 SOLE DISPOSITIVE POWER 1,700,000
----------------------------------------------------------------
10 SHARED DISPOSITIVE POWER
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 1,700,000
- -------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES*
[ ]
- -------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 20.7%
- -------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON* CO
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
*SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE>
SCHEDULE 13D
CUSIP No. 833 672 108 Page 3 of 18 Pages
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NAME OF REPORTING PERSON
1 S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Telenor AS
- -------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [ ]
(b) [ X ]
- -------------------------------------------------------------------------------
3 SEC USE ONLY
- -------------------------------------------------------------------------------
4 SOURCE OF FUNDS* AF
- -------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDING IS REQUIRED PURSUANT TO ITEMS
2(d) or 2(e) [ ]
- -------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION Norway
- -------------------------------------------------------------------------------
NUMBER OF 7 SOLE VOTING POWER
SHARES
BENEFICIALLY ----------------------------------------------------------------
OWNED BY 8 SHARED VOTING POWER 600,000
EACH
REPORTING ----------------------------------------------------------------
PERSON WITH 9 SOLE DISPOSITIVE POWER
----------------------------------------------------------------
10 SHARED DISPOSITIVE POWER 600,000
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 600,000
- -------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES*
[ ]
- -------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 8.4%
- -------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON* CO
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
*SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE>
SCHEDULE 13D
CUSIP No. 833 672 108 Page 4 of 18 Pages
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NAME OF REPORTING PERSON
1 S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Telenor Venture AS
- -------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [ ]
(b) [ X ]
- -------------------------------------------------------------------------------
3 SEC USE ONLY
- -------------------------------------------------------------------------------
4 SOURCE OF FUNDS* WC
- -------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDING IS REQUIRED PURSUANT TO ITEMS
2(d) or 2(e) [ ]
- -------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION Norway
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NUMBER OF 7 SOLE VOTING POWER
SHARES
BENEFICIALLY ----------------------------------------------------------------
OWNED BY 8 SHARED VOTING POWER 600,000
EACH
REPORTING ----------------------------------------------------------------
PERSON WITH 9 SOLE DISPOSITIVE POWER
----------------------------------------------------------------
10 SHARED DISPOSITIVE POWER 600,000
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 600,000
- -------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES*
[ ]
- -------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 8.4%
- -------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON* CO, IV
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
*SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE>
SCHEDULE 13D
CUSIP No. 833 672 108 Page 5 of 18 Pages
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NAME OF REPORTING PERSON
1 S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
ForetagsByggarna B.V.
- -------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [ ]
(b) [ X ]
- -------------------------------------------------------------------------------
3 SEC USE ONLY
- -------------------------------------------------------------------------------
4 SOURCE OF FUNDS* WC
- -------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDING IS REQUIRED PURSUANT TO ITEMS
2(d) or 2(e) [ ]
- -------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION The Netherlands
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NUMBER OF 7 SOLE VOTING POWER
SHARES
BENEFICIALLY ----------------------------------------------------------------
OWNED BY 8 SHARED VOTING POWER 700,000
EACH
REPORTING ----------------------------------------------------------------
PERSON WITH 9 SOLE DISPOSITIVE POWER
----------------------------------------------------------------
10 SHARED DISPOSITIVE POWER 700,000
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 700,000
- -------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES*
[ ]
- -------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 10.1%
- -------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON* CO, IV
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
*SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE>
SCHEDULE 13D
CUSIP No. 833 672 108 Page 6 of 18 Pages
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NAME OF REPORTING PERSON
1 S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Lars Lindgren
- -------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [ ]
(b) [ X ]
- -------------------------------------------------------------------------------
3 SEC USE ONLY
- -------------------------------------------------------------------------------
4 SOURCE OF FUNDS* AF
- -------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDING IS REQUIRED PURSUANT TO ITEMS
2(d) or 2(e) [ ]
- -------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION Swedish
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NUMBER OF 7 SOLE VOTING POWER -0-
SHARES
BENEFICIALLY ----------------------------------------------------------------
OWNED BY 8 SHARED VOTING POWER 700,000
EACH
REPORTING ----------------------------------------------------------------
PERSON WITH 9 SOLE DISPOSITIVE POWER -0-
----------------------------------------------------------------
10 SHARED DISPOSITIVE POWER 700,000
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 700,000
- -------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES*
[ ]
- -------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 10.1%
- -------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON* IN
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
*SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE>
SCHEDULE 13D
CUSIP No. 833 672 108 Page 7 of 18 Pages
ITEM 1. SECURITY AND ISSUER.
(a) Common Stock
(b) Socket Communications, Inc.
37400 Central Court
Newark, CA 94560
ITEM 2. IDENTITY AND BACKGROUND.
The information in this Item 2, as well as the information under Items 3, 4, 5
and 6, is provided for each reporting person and for each person for whom
information is required to be provided by General Instruction C to Schedule 13D
(Reg. Section 240.13d-101).
CETRONIC AKTIEBOLAG (PUBL)
(a) Cetronic Aktiebolag (Publ), a corporation formed under the laws of Sweden
("CETRONIC")
(b) Kungsholms Strand 147
SE-11428 Stockholm
Sweden
(c) Develops and markets software and hardware for wireless communications
markets.
(d) During the last five years, Cetronic has not been convicted in a criminal
proceeding.
(e) During the last five years, Cetronic was not a party to a civil
proceeding of a judicial or administrative body as a result of which
Cetronic was or is subject to a judgment, decree or final order enjoining
future violations of, or prohibiting or mandating activities subject to,
federal or state securities laws or finding any violation with respect to
such laws.
EXECUTIVE OFFICERS AND DIRECTORS OF CETRONIC
(a), (b), (c) and (f) The following sets forth the name, citizenship, business
address and present principal occupation of each of the directors and executive
officers of Cetronic. Each of the directors and executive officers of Cetronic
with the exception of Thor O. Olsen and Per-Christian Berntsen is a citizen of
Sweden. Mr. Olsen and Mr. Berntsen are citizens of Norway.
Name and Business Address Present Principal Occupation
- ------------------------- ----------------------------
Directors and Executive Officers of Cetronic
- --------------------------------------------
Jorgen Friman Managing Director
Kungsholms Strand 147
SE-11428 Stockholm
Sweden
Kurt Sjoblom Consultant to Cetronic
Kungsholms Strand 147
SE-11428 Stockholm
Sweden
<PAGE>
SCHEDULE 13D
CUSIP No. 833 672 108 Page 8 of 18 Pages
Jan Erik Larsson Owner of Jelka
Thulegatan 25, 1 tr Forvaltning AB
852 36 Sundsvall, Sweden
Thor O. Olsen Senior Vice President of
Keysersgt 13 Telenor Venture AS
P.O. Box 6701
St. Olavs Plass
0130 Oslo, Norway
Per-Christian Berntsen Vice President, Seatex AS
Universitetsgt 7
P.O. Box 6746
St. Olavs Plass
0130 Oslo, Norway
Lars Lindgren Partner in ForetagsByggarna AB
Norrmalmstorg 14
111 46 Stockholm, Sweden
Martin Gemvik Partner in
Norrmalmstorg 14 ForetagsByggarna AB
111 46 Stockholm, Sweden
Jan Ramkvist Partner in
Linnegatan 2 Advokatfirman Fylgia KB
P.O. Box 55555
S-10204 Stockholm, Sweden
(d) During the last five years, none of the above executive officers and
directors of Cetronic has been convicted in a criminal proceeding.
(e) During the last five years, none of the above executive officers and
directors of Cetronic has been a party to a civil proceeding of a
judicial or administrative body as a result of which such executive
officer or director was or is subject to a judgment, decree or final
order enjoining future violations of, or prohibiting or mandating
activities subject to, federal or state securities laws or finding any
violation with respect to such laws.
TELENOR AS
(a) Telenor AS, a corporation formed under the laws of Norway.
(b) Universitetsgt 2
P. O. Box 6701
St. Olavs Plass
0130 Oslo, Norway
(c) Production and supply of services in the fields of telecommunications,
data services, and media distribution.
(d) During the last five years, Telenor AS has not been convicted in a
criminal proceeding.
<PAGE>
SCHEDULE 13D
CUSIP No. 833 672 108 Page 9 of 18 Pages
(e) During the last five years, Telenor AS was not a party to a civil
proceeding of a judicial or administrative body as a result of which
Telenor AS was or is subject to a judgment, decree or final order
enjoining future violations of, or prohibiting or mandating activities
subject to, federal or state securities laws or finding any violation
with respect to such laws.
EXECUTIVE OFFICERS AND DIRECTORS OF TELENOR AS
(a), (b), (c) and (f) The following information sets forth the name,
citizenship, business address and present principal occupation of each of the
directors and executive officers of Telenor AS. Each of the directors and
executive officers of Telenor AS is a citizen of Norway. Except as otherwise
indicated, the business address of each of such persons is Universitetsgt 2,
P.O. Box 6701, St. Olavs Plass, 0130 Oslo, Norway.
Name and Business Address Present Principal Occupation
- ------------------------- ----------------------------
Directors of Telenor AS
- -----------------------
Arnfinn Hofstad Director
NKL
Kirkegaten 4
0153 Oslo, Norway
Christian Brinch Director
Helikopter Service AS
Langkaia 1
0150 Oslo, Norway
Terje Moe Gustavsen Manager
LO Stat.
Mollergt.10
0179 Oslo, Norway
Oddbjorn Nordset Deputy County Governor
Fylkesmannen i Nord-Trondelag
Strandveien 38, Statens hus
7700 Steinkjer, Norway
Ashild Bendiktsen Chief Financial Officer
Entreprenor Bendiktsen
& Aasen A/S
P.O. Box 233
9350 Sjoevegan, Norway
Inger Karin Nerheim Managing Director
Olympia Utvikling-Troll Park AS
2600 Lillehammer, Norway
Synnove Lohne-Knudsen Union Leader
Kommunikasjons-og
Teletilsattes Landsforbund
Kongensgate 15
0153 Oslo, Norway
<PAGE>
SCHEDULE 13D
CUSIP No. 833 672 108 Page 10 of 18 Pages
Svein Eivind Solheim Manager of Operations
Telenor Istallasjon AS
Forde, Norway
Anne Sorlie Consultant
Tele-og Dataforbundet
P. O. Box 6701, St. Olavs pl.
0130 Oslo, Norway
Executive Officers of Telenor AS
- --------------------------------
Tormod Hermansen President and Chief
Executive Officer
Ole Petter Hakonsen Senior Executive
Vice President
Terje Thon Senior Executive
Vice President
Torstein Moland Executive Vice President
and Chief Financial Officer
Magnus Dokset Executive Vice President
Marit Doving Executive Vice President
Peter Pay Executive Vice President
(d) During the last five years, none of the above executive officers and
directors of Telenor AS has been convicted in a criminal proceeding.
(e) During the last five years, none of the above executive officers and
directors of Telenor AS has been a party to a civil proceeding of a
judicial or administrative body as a result of which such executive
officer or director was or is subject to a judgment, decree or final
order enjoining future violations of, or prohibiting or mandating
activities subject to, federal or state securities laws or finding
any violation with respect to such laws.
TELENOR VENTURE AS
(a) Telenor Venture AS, a corporation formed under the laws of Norway
("TELENOR")
(b) Post Boks 6701
St. Olavs Plass
0130 Oslo, Norway
(c) Investment company with venture capital investments in public and private
companies.
(d) During the last five years, Telenor has not been convicted in a criminal
proceeding.
(e) During the last five years, Telenor was not a party to a civil proceeding
of a judicial or administrative body as a result of which Telenor was or
is subject to a judgment, decree or final order enjoining future
violations of, or
<PAGE>
SCHEDULE 13D
CUSIP No. 833 672 108 Page 11 of 18 Pages
prohibiting or mandating activities subject to, federal or state
securities laws or finding any violation with respect to such laws.
EXECUTIVE OFFICERS AND DIRECTORS OF TELENOR
(a), (b), (c) and (f) The following information sets forth the name,
citizenship, business address and present principal occupation of each of the
directors and executive officers of Telenor. Each of the directors and
executive officers of Telenor is a citizen of Norway. Except as otherwise
indicated, the business address of each of such persons is Keysersgt 13, P.O.
Box 6701, St. Olavs Plass, 0130 Oslo, Norway.
Name and Business Address Present Principal Occupation
- ------------------------- ----------------------------
Directors and Executive Officers of Telenor Venture AS
- ------------------------------------------------------
Rune Rinnan President and Chief Executive Officer
Thor O. Olsen Senior Vice President
Tortsein Moland Executive Vice President and
Universitetsgaten 2 Chief Financial Officer
0165 Oslo, Norway of Telenor AS
Oddvar Hesjedal Managing Director
Universitetsgaten 2 (R&D) of Telenor Fou AS
0165 Oslo, Norway
Peter Pay Chairman of the Board; Executive Vice President
Keysersgt 15 of Telenor AS
0165 Oslo, Norway
Peter Hermanrud Investment Director
Folke Bernadottesv 40 of Vital Forsikring AS
5020 Bergen, Norway
Ronny Johan Langeland Director of Storebrand
Postboks 1380, Vika Investment Management
Stranden 3B, Aker Brygge
0114 Oslo, Norway
(d) During the last five years, none of the above executive officers and
directors of Telenor has been convicted in a criminal proceeding.
(e) During the last five years, none of the above executive officers and
directors of Telenor has been a party to a civil proceeding of a judicial
or administrative body as a result of which such executive officer or
director was or is subject to a judgment, decree or final order enjoining
future violations of, or prohibiting or mandating activities subject to,
federal or state securities laws or finding any violation with respect to
such laws.
<PAGE>
SCHEDULE 13D
CUSIP No. 833 672 108 Page 12 of 18 Pages
FORETAGSBYGGARNA B.V.
(a) ForetagsByggarna B.V., corporation formed under the laws of The
Netherlands ("FB")
(b) A.J. Ernststraat 595 H
1082 LD Amsterdam
The Netherlands
(c) Investment company with venture capital investments in public and private
companies.
(d) During the last five years, FB has not been convicted in a criminal
proceeding.
(e) During the last five years, FB was not a party to a civil proceeding of a
judicial or administrative body as a result of which FB was or is subject
to a judgment, decree or final order enjoining future violations of, or
prohibiting or mandating activities subject to, federal or state
securities laws or finding any violation with respect to such laws.
EXECUTIVE OFFICERS AND DIRECTORS OF FB
(a), (b), (c) and (f) The sole director and executive officer of FB is B.V.
European Trust Services Amsterdam (E.T.S.A.) ("EUROPEAN TRUST"), a corporation
formed under the laws of The Netherlands and engaged in providing management and
administrative services to corporations and other business organizations. The
business address of such person is A.J. Ernststraat 595H, 7th Floor, 1082 LD
Amsterdam, The Netherlands. The executive officers and proxy holders of
European Trust are as follows: Mark van Santen (Managing Director), Antonie
Marten Schuller (Assistant Managing Director), Evert Jacobus Jozef Meilink
(Proxy Holder) and Jan Scheelings (Proxy Holder). All such executive officers
and proxy holders are citizens of The Netherlands and the business address of
each such person is A.J. Ernststraat 595H, 7th Floor, 1082 LD Amsterdam, The
Netherlands.
(d) During the lasts five years, none of European Trust or any of its
executive officers or proxy holders has been convicted in a criminal
proceeding.
(e) During the last five years, none of European Trust or any its executive
officers or proxy holders has been a party to a civil proceeding of a
judicial or administrative body as a result of which such person was or
is subject to a judgment, decree or final order enjoining future
violations of, or prohibiting or mandating activities subject to, federal
or state securities laws or finding any violation with respect to such
laws.
LARS LINDGREN (DIRECTOR OF CETRONIC AND CONTROLLING STOCKHOLDER OF FB)
(a) Lars Lindgren
(b) Norrmalmstorg 14
111 46 Stockholm, Sweden
(c) Engages in venture capital investments and activities, serves as a
consultant to FB and is a partner in ForetagsByggarna AB, Norrmalmstorg
14, 111 46 Stockholm, Sweden.
(d) During the last five years, Mr. Lindgren has not been convicted in a
criminal proceeding.
(e) During the last five years, Mr. Lindgren was not a party to a civil
proceeding of a judicial or administrative body as a result of which Mr.
Lindgren was or is subject to a judgment, decree or final order enjoining
future
<PAGE>
SCHEDULE 13D
CUSIP No. 833 672 108 Page 13 of 18 Pages
violations of, or prohibiting or mandating activities subject to,
federal or state securities laws or finding any violation with
respect to such laws.
(f) Swedish citizen.
ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
On January 29, 1997, Socket received a Five Hundred Thousand Dollar
($500,000) loan from Cetronic pursuant to a Subordinated Secured
Convertible Promissory Note issued by Socket to Cetronic. On June 12,
1997, Cetronic loaned Socket an additional Five Hundred Thousand Dollars
($500,000) pursuant to a Subordinated Convertible Promissory Note. On
November 24, 1997, Cetronic loaned Socket an additional One Hundred
Thousand Dollars ($100,000) pursuant to an additional Subordinated
Convertible Promissory Note. On February 14, 1997, Socket received an
aggregate of Five Hundred Thousand Dollars ($500,000) in loans from
several Cetronic shareholders including Telenor ($300,000) and FB
($140,000) pursuant to Subordinated Convertible Promissory Notes. In
addition, during May and June 1997, FB purchased in the open market an
aggregate of Three Hundred Fifty-Five Thousand (355,000) shares of
Socket's Common Stock for an aggregate purchase price of Two Hundred
Forty-Eight Thousand Seven Hundred Eighty-Eight Dollars and Twenty-Five
Cents ($248,788.25) and sold Eighty-Five Thousand (85,000) shares for an
aggregate sale price of Sixty-One Thousand Ninety-Three Dollars and
Seventy-Five Cents ($61,093.75). In addition, on September 16, 1997, FB
acquired an option to purchase up to $500,000 in principal amount of
subordinated convertible promissory notes of Socket in consideration for
FB's commitment to make a purchase of $140,000 in principal amount of
subordinated convertible promissory notes in the event Socket achieves
certain business milestones on or before October 31, 1997. Although
Socket failed to achieve the specified milestones, FB exercised its
option under its Agreement and Option to Invest on November 7, 1997 and
provided Socket Seventy-Five Thousand ($75,000) pursuant to an additional
Subordinated Convertible Promissory Note. (See Item 4 incorporated by
reference herein for a description of the terms of the above convertible
promissory notes.)
The source of funds used by Cetronic to fund the Subordinated Secured
Convertible Promissory Note and the $100,000 Subordinated Convertible
Promissory Note, and each of the other loans by Telenor and FB and open
market purchases by FB was the general working capital of the applicable
reporting person. The funds used to fund the purchase of the $500,000
Subordinated Convertible Promissory Note by Cetronic were raised by
Cetronic pursuant to the sale of its convertible subordinated debentures
bearing interest at eight percent (8%) per annum. Such debentures, as
amended, are convertible on or about January 15, 1998 into an aggregate
of One Hundred Twenty Thousand (120,000) Class A shares of Cetronic. The
convertible subordinated debentures were purchased by the following
persons: Telenor Venture AS, ForetagsByggarna B.V., Revert AB, Nils-Erik
Sjoblom, Karl-Erik Eklund, Martin Gemvik, Mariegarden Investment AB,
Jelka Forvaltning, Mats Carlgrens Stiftelse AB, TRC/Statens institut for
blinda, Goran Garberg, Tellus Maskin AB, Birgitta Holmstrom, Familjen
Ljungberg, Gert Blomen, Gerania AB, Scandinavian Merchant Group, Fredrik
Grunewald, Cambista AB, Bona Utilia AB, Sture Lunden.
The other reporting persons acquired their beneficial interest in the
Common Stock of Socket held by Telenor and FB solely by reason of their
relationship to such entity. Telenor AS is a seventy percent (70%)
shareholder of Telenor which, in turn, holds a twenty-one and nine tenths
percent (21.9%) stockholding interest and a thirty-one percent (31%)
voting interest in Cetronic. Telenor AS and Telenor disclaim any
beneficial ownership of the shares of Socket held by Cetronic. Lars
Lindgren is a controlling stockholder of FB.
<PAGE>
SCHEDULE 13D
CUSIP No. 833 672 108 Page 14 of 18 Pages
ITEM 4. PURPOSE OF TRANSACTION.
On January 29, 1997, Socket received a Five Hundred Thousand Dollar
($500,000) loan from Cetronic pursuant to a Subordinated Secured
Convertible Promissory Note (the "CETRONIC NOTE") issued by Socket to
Cetronic. The interest rate on the Cetronic Note is eight percent (8%)
and the term was initially six (6) months. The principal and accrued
interest thereon may be converted into the Company's Common Stock at One
Dollar ($1.00) per share at any time during the term at the option of
Cetronic. The Company may also prepay the Cetronic Note and whole or in
part at any time upon prior written notice to Cetronic. The Cetronic
Note is secured by certain marketing and manufacturing rights with
respect to four (4) products being developed jointly by Socket and
Cetronic. On February 14, 1997, Socket additionally received an
aggregate of Five Hundred Thousand Dollars ($500,000) in loans (the
"STOCKHOLDER NOTES") from several Cetronic shareholders including Telenor
($300,000) and FB ($140,000). The terms of each note were identical to
the terms of the Cetronic Note except that the Stockholder Notes were
unsecured. All such notes received by Cetronic, Telenor and FB were
acquired for investment purposes.
During May and June 1997, FB purchased in the open market an aggregate of
Three Hundred Fifty-Five Thousand (355,000) shares of the Company's
Common Stock for an aggregate purchase price of Two Hundred Forty-Eight
Thousand Seven Hundred Eighty-Eight Dollars and Twenty-Five Cents
($248,788.25) and sold Eighty-Five Thousand (85,000) shares for an
aggregate sale price of Sixty-One Thousand Ninety-Three Dollars and
Seventy-Five Cents ($61,093.75). All such transactions were entered into
by FB for investment purposes.
On June 12, 1997, Cetronic and Socket entered into a Combination
Agreement (the "COMBINATION AGREEMENT") pursuant to which Socket would
acquire, pursuant to an exchange offer and, if deemed necessary by
Socket, through compulsory acquisition proceedings in accordance with the
Swedish Companies Act, all the issued and outstanding stock of Cetronic.
Under the terms of the Combination Agreement, Socket would be issued up
to $11.7 Million in Socket Common Stock in exchange for all of the common
shares of Cetronic.
Concurrently with execution of the Combination Agreement, Cetronic
provided Socket an additional Five Hundred Thousand Dollar ($500,000)
loan pursuant to a Subordinated Convertible Promissory Note (the "BRIDGE
NOTE") to provide additional working capital to Socket pending completion
of the merger. The initial terms of this note were identical to the
terms of the original Cetronic Note except that the Bridge Note was
unsecured.
In addition, Cetronic agreed to extend the maturity dates of the Cetronic
Note and use its best efforts to extend the maturity dates of the
Stockholder Notes so that they each became due on the same date as the
Bridge Note. On July 29, 1997, Cetronic entered into Amendment No. 1 to
the Cetronic Note extending the maturity dated of the Cetronic Note to
correspond to the maturity date of the Bridge Note. On September 15,
1997, Cetronic entered into Amendment No. 1 to the Bridge Note and
Amendment No. 2 to the Cetronic Note subordinating the Bridge Note and
Cetronic Note to additional indebtedness of Socket. On or about
October 30, 1997, Cetronic agreed to extend the maturity dates of the
Cetronic Note and the Bridge Note to December 12, 1998 and to reduce the
initial conversion price of the Bridge Note from $1.00 to $0.50. Each of
the holders (except Telenor) of the Stockholder Notes agreed to amend and
restate its Stockholder Note as of August 14, 1997 to extend its maturity
date to August 14, 1998, to subordinate it to additional indebtedness of
Socket and to reduce its initial conversion price from $1.00 to $0.50.
Also, on or about September 16, 1997 in connection with the foregoing
amendment and restatement of certain of the Stockholder Notes, each
holder (except Telenor) of the Stockholder Notes executed an Agreement
and Option to Invest with Socket which provided each holder with an
option to invest up to an additional amount in Socket pursuant to the
purchase of additional subordinated convertible promissory notes on
substantially the same terms and conditions as the amended and restated
Stockholder Notes. On October 3, 1997, Telenor agreed to extend the
maturity date of its Stockholder Note to August 14, 1998 in
<PAGE>
SCHEDULE 13D
CUSIP No. 833 672 108 Page 15 of 18 Pages
consideration of a reduction in the initial conversion price from
$1.00 to $0.50 and certain amendments to the registration rights
granted thereunder.
All holders of Stockholder Notes (other than Telenor) also committed to
invest in the aggregate an additional minimum amount of $200,000 if
Socket achieved certain business milestones on or before October 31,
1997. Socket failed to achieve the specified milestones. However, FB
and certain other Cetronic stockholders exercised their options under
their respective Agreement and Option to Invest and provided an aggregate
of $150,000 to Socket pursuant to additional Subordinated Convertible
Promissory Notes dated November 7, 1997. On November 24, 1997, Cetronic
purchased an additional Subordinated Convertible Promissory Note from
Socket in the principal amount of $100,000, convertible at an initial
conversion price of $0.50 per share. The initial terms of the
Subordinated Convertible Promissory Notes issued to FB on November 7,
1997 and to Cetronic on November 24, 1997 were substantially identical.
The transactions contemplated pursuant to the Combination Agreement
have not been consummated. The Combination Agreement expired
in accordance with its terms on or about December 12, 1997. On
December 10, 1997, Cetronic and Socket entered into a Letter of
Intent to cooperate in a new joint venture designed to combine the
wireless businesses of the two companies into a single entity owned by
Cetronic and Socket. The specific terms of the joint venture are
subject to further negotiation by the parties and the approval of the
Boards of Directors of each company.
Except as set forth above, no person named in Item 2 to this Schedule 13D
currently has any plans or proposals which relate to or would result in:
(a) the acquisition by any such person of any additional securities of
Socket, or the disposition of securities of Socket; (b) an extraordinary
corporate transaction, such as a merger or liquidation, involving Socket
or any of its subsidiaries; (c) a sale or transfer of a material amount
of assets of Socket or any of its subsidiaries; (d) any change in the
present Board of Directors or management of Socket, including any plans
or proposals to change the number or term or directors or to fill any
existing vacancies on the Board; (e) any material change in the present
capitalization or dividend policy of Socket; (f) any other material
change in Socket's business or corporate structure; (g) changes in
Socket's charter, bylaws or instruments corresponding thereto or other
actions which may impede the acquisition of control of Socket by any
person; (h) causing a class of securities of Socket to be delisted from a
national securities exchange or to cease to be authorized to be quoted in
an inter-dealer quotation system of a registered national securities
association; (i) a class of equity securities of Socket becoming eligible
for termination of registration pursuant to Section 12(g)(4) of the
Securities Exchange Act of 1934; or (j) any action similar to any of the
foregoing.
ITEM 5. INTEREST IN SECURITIES OF THE ISSUER.
(a) The following table sets forth the aggregate number and percentage of the
class of securities identified in Item 1 beneficially owned (identifying
those shares which there is a right to acquire) by each person named in
Item 2 of this Schedule 13D. The following information is based upon
information regarding the number of securities outstanding as supplied by
Socket.
<PAGE>
SCHEDULE 13D
CUSIP No. 833 672 108 Page 16 of 18 Pages
<TABLE>
Number of Shares Percentage of Class
Person Beneficially Owned Beneficially Owned
- ------ ------------------ ---------------------
Right to Right to
Aggregate Acquire Aggregate Acquire
--------- -------- --------- --------
<S> <C> <C> <C> <C>
Cetronic 1,700,000 1,700,000 20.7% 20.7%
Telenor 600,000 600,000 8.4% 8.4%
Telenor AS 600,000 600,000 8.4% 8.4%
FB 700,000 430,000 10.1% 6.2%
Lars Lindgren 700,000 430,000 10.1% 6.2%
</TABLE>
(b) The information contained in Lines (7), (8), (9) and (10) of the cover
pages hereof (Pages 2 through 6) is incorporated herein by this reference.
(c) Inapplicable
(d) Inapplicable
(e) Inapplicable
ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR
RELATIONSHIPS WITH RESPECT TO SECURITIES OF THE ISSUER.
Except as described in Item 4, none of the reporting persons has any
contracts, arrangements, understandings or relationships (legal or
otherwise) with any person with respect to any securities of Socket,
including, but not limited to, transfer or voting of any of the securities,
finder's fees, joint ventures, loan or option arrangements, puts or calls,
guaranties of loans, guaranties against loss or guaranties of profits,
division of profits or loss, or the giving or withholding of proxies.
ITEM 7. MATERIAL TO BE FILED AS EXHIBITS.
1. Attached hereto as Exhibit "A" is a copy of the reporting
persons' agreement pursuant to Rule 13d-1(f)(1)(iii).
2. Attached hereto as Exhibit "B" is a copy of the Combination
Agreement dated June 12, 1997 by and between Cetronic and Socket.
3. Attached hereto as Exhibit "C" is a copy of the Subordinated
Secured Convertible Promissory Note issued by Socket to Cetronic
on January 29, 1997 and the forms of Amendments Nos. 1 and 2
thereto.
4. Attached hereto as Exhibit "D" is a copy of the form of
Subordinated Convertible Promissory Note issued by Socket to
Cetronic on June 12, 1997 and the form of Amendment No. 1
thereto.
<PAGE>
SCHEDULE 13D
CUSIP No. 833 672 108 Page 17 of 18 Pages
5. Attached hereto as Exhibit "E" is a copy of the form of
Subordinated Convertible Promissory Note issued by Socket to
Telenor and FB on February 14, 1997.
6. Attached hereto as Exhibit "F" is a copy of the form of the
Amended and Restated Subordinated Convertible Promissory Note
issued by Socket to FB and others on September 16, 1997 amending
and restating certain Notes issued on February 14, 1997.
7. Attached hereto as Exhibit "G" is a copy of the form of the
Agreement and Option to Invest issued by Socket to FB on
September 16, 1997.
8. Attached hereto as Exhibit "H" is a copy of the form of Amended
Subordinated Convertible Promissory Note issued by Socket to
Telenor on or about October 3, 1997 amending the Note issued on
February 14, 1997.
9. Attached hereto as Exhibit "I" is a copy of the form of
Subordinated Convertible Promissory Notes issued by Socket to FB
on November 7, 1997 and to Cetronic on November 24, 1997.
10. Attached hereto as Exhibit "J" is a copy of the Letter of
Intent To Cooperate in a Wireless Joint Venture dated December
10, 1997 by and between Cetronic and Socket.
<PAGE>
SCHEDULE 13D
CUSIP No. 833 672 108 Page 18 of 18 Pages
SIGNATURES
After reasonable inquiry and to the best of my knowledge and belief, I certify
that the information set forth in this statement is true, complete and correct.
This statement may be executed in counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and the same
instrument.
Dated: February 11, 1998 Cetronic Aktiebolag (Publ), a Swedish
corporation
By: /s/ Richard A. Horning
---------------------------------------
Richard A. Horning, Attorney-In-Fact
Dated: February 11, 1998 Telenor AS, a Norwegian corporation
By: /s/ Richard A. Horning
---------------------------------------
Richard A. Horning, Attorney-In-Fact
Dated: February 11, 1998 Telenor Venture AS, a Norwegian corporation
By: /s/ Richard A. Horning
---------------------------------------
Richard A. Horning, Attorney-In-Fact
Dated: February 11, 1998 ForetagsByggarna B.V., a Netherlands
corporation
By: /s/ Richard A. Horning
---------------------------------------
Richard A. Horning, Attorney-In-Fact
Dated: February 11, 1998 Lars Lindgren
/s/ Richard A. Horning
------------------------------------------
Richard A. Horning, Attorney-In-Fact
<PAGE>
EXHIBIT A
---------
AGREEMENT
---------
This will memorialize the agreement by and among all of the
undersigned that the Schedule 13D identifying each of the undersigned as
"reporting persons" and mailed to Socket Communications, Inc. ("SOCKET") and
filed with the Securities and Exchange Commission on or about February 11,
1998 with respect to the acquisition of beneficial ownership of shares of
Socket's Common Stock is being filed on behalf of each of the persons signing
below. This Agreement may be executed in counterparts, each of which shall be
deemed an original, but all of which together shall constitute one and the
same instrument.
Dated: February 11, 1998 Cetronic Aktiebolag (Publ), a Swedish
corporation
By: /s/ Richard A. Horning
---------------------------------------
Richard A. Horning, Attorney-In-Fact
Dated: February 11, 1998 Telenor AS, a Norwegian corporation
By: /s/ Richard A. Horning
---------------------------------------
Richard A. Horning, Attorney-In-Fact
Dated: February 11, 1998 Telenor Venture AS, a Norwegian corporation
By: /s/ Richard A. Horning
---------------------------------------
Richard A. Horning, Attorney-In-Fact
Dated: February 11, 1998 ForetagsByggarna B.V., a Netherlands
corporation
By: /s/ Richard A. Horning
---------------------------------------
Richard A. Horning, Attorney-In-Fact
Dated: February 11, 1998 Lars Lindgren
By: /s/ Richard A. Horning
---------------------------------------
Richard A. Horning, Attorney-In-Fact
<PAGE>
EXHIBIT B
COMBINATION AGREEMENT
BY AND BETWEEN
SOCKET COMMUNICATIONS, INC.
AND
CETRONIC AKTIEBOLAG [PUBL]
DATED AS OF JUNE 12, 1997
<PAGE>
TABLE OF CONTENTS
PAGE
ARTICLE I - THE TRANSACTIONS . . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 1.01 Closing . . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 1.02 The Exchange Offer . . . . . . . . . . . . . . . . . . . . 1
SECTION 1.03 Depositary . . . . . . . . . . . . . . . . . . . . . . . . 3
SECTION 1.04 Compulsory Acquisition . . . . . . . . . . . . . . . . . . 3
ARTICLE II - REPRESENTATIONS AND WARRANTIES OF SOCKET . . . . . . . . . . . . 3
SECTION 2.01 Organization and Qualification; Subsidiaries . . . . . . . 4
SECTION 2.02 Capitalization . . . . . . . . . . . . . . . . . . . . . . 4
SECTION 2.03 Authority Relative to This Agreement . . . . . . . . . . . 5
SECTION 2.04 No Conflict; Required Filings and Consents . . . . . . . . 5
SECTION 2.05 Permits; Compliance . . . . . . . . . . . . . . . . . . . 5
SECTION 2.06 SEC Filings; Financial Statements . . . . . . . . . . . . 6
SECTION 2.07 Absence of Certain Changes or Events . . . . . . . . . . . 6
SECTION 2.08 Employee Benefit Plans; Labor Matters . . . . . . . . . . 7
SECTION 2.09 Contracts; Debt Instruments . . . . . . . . . . . . . . . 8
SECTION 2.10 Litigation . . . . . . . . . . . . . . . . . . . . . . . . 8
SECTION 2.11 Environmental Matters . . . . . . . . . . . . . . . . . . 8
SECTION 2.12 Trademarks, Patents and Copyrights . . . . . . . . . . . . 9
SECTION 2.13 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . 9
SECTION 2.14 Brokers . . . . . . . . . . . . . . . . . . . . . . . . . 9
SECTION 2.15 Interested Party Transactions . . . . . . . . . . . . . 10
SECTION 2.16 Ownership of Property . . . . . . . . . . . . . . . . . 10
SECTION 2.17 Material Relationships . . . . . . . . . . . . . . . . . 10
SECTION 2.18 Disclosure . . . . . . . . . . . . . . . . . . . . . . . 10
ARTICLE III - REPRESENTATIONS AND WARRANTIES OF CETRONIC
SECTION 3.01 Organization and Qualification; Subsidiaries . . . . . . 10
SECTION 3.02 Capitalization . . . . . . . . . . . . . . . . . . . . . 11
SECTION 3.03 Authority Relative to This Agreement . . . . . . . . . . 11
SECTION 3.04 No Conflict; Required Filings and Consents . . . . . . . 12
SECTION 3.05 Permits; Compliance . . . . . . . . . . . . . . . . . . 12
SECTION 3.06 Financial Statements . . . . . . . . . . . . . . . . . . 13
SECTION 3.07 Absence of Certain Changes or Events . . . . . . . . . . 13
SECTION 3.08 Employee Benefit Plans; Labor Matters . . . . . . . . . 13
SECTION 3.09 Contracts; Debt Instruments . . . . . . . . . . . . . . 14
SECTION 3.10 Litigation . . . . . . . . . . . . . . . . . . . . . . . 15
SECTION 3.11 Environmental Matters . . . . . . . . . . . . . . . . . 15
SECTION 3.12 Trademarks, Patents and Copyrights . . . . . . . . . . . 15
SECTION 3.13 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . 16
SECTION 3.14 Interested Party Transactions . . . . . . . . . . . . . 16
SECTION 3.15 Ownership of Property . . . . . . . . . . . . . . . . . 16
SECTION 3.16 Material Relationships . . . . . . . . . . . . . . . . . 16
SECTION 3.17 Disclosure . . . . . . . . . . . . . . . . . . . . . . . 16
<PAGE>
Combination Agreement By and Between
Socket Communications, Inc. and
Cetronic Aktiebolag [Publ]
Dated as of June 12, 1997
Page ii
ARTICLE IV - COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
SECTION 4.01 Conduct of Business by Socket Pending the Closing . . . 17
SECTION 4.02 Conduct of Business by Cetronic Pending the Closing . . 18
SECTION 4.03 Cooperation . . . . . . . . . . . . . . . . . . . . . . 20
SECTION 4.04 Notices of Certain Events . . . . . . . . . . . . . . . 20
SECTION 4.05 Contractual Consents . . . . . . . . . . . . . . . . . . 21
ARTICLE V - ADDITIONAL AGREEMENTS . . . . . . . . . . . . . . . . . . . . . 21
SECTION 5.01 Registration Statement; Disclosure Documents . . . . . . 21
SECTION 5.02 Stockholders' Meetings . . . . . . . . . . . . . . . . . 23
SECTION 5.03 Access to Information; Confidentiality . . . . . . . . . 23
SECTION 5.04 No Solicitation of Transactions . . . . . . . . . . . . .24
SECTION 5.05 Employee Benefits Matters . . . . . . . . . . . . . . . 25
SECTION 5.06 Letters of Accountants . . . . . . . . . . . . . . . . . 25
SECTION 5.07 Further Action; Consents; Filings . . . . . . . . . . . 25
SECTION 5.08 Socket Organization . . . . . . . . . . . . . . . . . . 26
SECTION 5.09 Public Announcements . . . . . . . . . . . . . . . . . . 26
SECTION 5.10 Stock Exchange Listings . . . . . . . . . . . . . . . . 26
SECTION 5.11 Convertible Bridge Loans . . . . . . . . . . . . . . . . 27
SECTION 5.12 Cetronic Intellectual Property Agreements . . . . . . . 27
SECTION 5.13 Termination of Cetronic Stockholders' Agreement . . . . 27
SECTION 5.14 Cetronic Related-Party Agreements . . . . . . . . . . . 27
SECTION 5.15 Conversion of Cetronic Convertible Notes . . . . . . . . 27
SECTION 5.16 Registration Rights Agreement . . . . . . . . . . . . . 27
ARTICLE IV - CONDITIONS TO THE TRANSACTIONS . . . . . . . . . . . . . . . . 28
SECTION 6.01 Conditions to the Obligations of Each Party to
Consummate the Transactions . . . . . . . . . . . . . . 28
SECTION 6.02 Conditions to the Obligations of Socket . . . . . . . . 28
SECTION 6.03 Conditions to the Obligations of Cetronic . . . . . . . 29
ARTICLE VII - TERMINATION, AMENDMENT AND WAIVER . . . . . . . . . . . . . . 30
SECTION 7.01 Termination . . . . . . . . . . . . . . . . . . . . . . 30
SECTION 7.02 Effect of Termination . . . . . . . . . . . . . . . . . 32
SECTION 7.03 Amendment . . . . . . . . . . . . . . . . . . . . . . . 32
SECTION 7.04 Waiver . . . . . . . . . . . . . . . . . . . . . . . . . 32
SECTION 7.05 Fees and Expenses . . . . . . . . . . . . . . . . . . . 32
ARTICLE VIII - GENERAL PROVISIONS . . . . . . . . . . . . . . . . . . . . . 34
SECTION 8.01 No Survival of Representations . . . . . . . . . . . . . 34
SECTION 8.02 Notices . . . . . . . . . . . . . . . . . . . . . . . . 34
SECTION 8.03 Certain Definitions . . . . . . . . . . . . . . . . . . 35
SECTION 8.04 Severability . . . . . . . . . . . . . . . . . . . . . . 36
SECTION 8.05 Assignment; Binding Effect; Benefit . . . . . . . . . . 36
SECTION 8.06 Incorporation of Exhibits . . . . . . . . . . . . . . . 37
SECTION 8.07 Governing Law . . . . . . . . . . . . . . . . . . . . . 37
SECTION 8.08 Arbitration . . . . . . . . . . . . . . . . . . . . . . 37
<PAGE>
Combination Agreement By and Between
Socket Communications, Inc. and
Cetronic Aktiebolag [Publ]
Dated as of June 12, 1997
Page iii
SECTION 8.09 Headings . . . . . . . . . . . . . . . . . . . . . . . . 38
SECTION 8.10 Counterparts . . . . . . . . . . . . . . . . . . . . . . 38
SECTION 8.11 Entire Agreement . . . . . . . . . . . . . . . . . . . . 39
<PAGE>
INDEX OF SCHEDULES
Socket Disclosure Schedule
Cetronic Disclosure Schedule
Schedule 5.11 -- Holders of Socket Convertible Promissory Notes
Schedule 5.12 -- Intellectual Property Agreements
Schedule 5.15 -- Holders of Cetronic Convertible Promissory Notes
Schedule 5.16 -- Registration Rights Holders
Schedule 6.3(f) -- Socket Consents
<PAGE>
INDEX OF EXHIBITS
Exhibit A Form of Cetronic Convertible Promissory Note
Exhibit B Form of Socket Convertible Promissory Note
<PAGE>
COMBINATION AGREEMENT
COMBINATION AGREEMENT, dated as of June 12, 1997 (this "Agreement"),
by and between CETRONIC AKTIEBOLAG [PUBL], a corporation organized under the
laws of the Kingdom of Sweden ("Cetronic"), and SOCKET COMMUNICATIONS, INC.,
a Delaware corporation ("Socket").
WHEREAS, the Boards of Directors of Cetronic and Socket have
determined that it is in the best interests of their respective companies and
stockholders to combine their respective businesses in a transaction to be
effected as set forth in this Agreement;
WHEREAS, upon the terms and subject to the conditions of this
Agreement, Socket will acquire, pursuant to an exchange offer (the "Exchange
Offer") and, if deemed necessary by Socket, through compulsory acquisition
proceedings in accordance with the Swedish Companies Act (collectively, the
"Transactions"), all the issued and outstanding Class A Common Shares,
nominal value SEK 1.00 per share, of Cetronic (the "Cetronic Class A Common
Shares"), and Class B Common Shares, nominal value SEK 1.00 per share, of
Cetronic (the "Cetronic Class B Common Shares," and together with the
Cetronic Class A Common Shares, the "Cetronic Shares"), as more fully
described below;
WHEREAS, as a result of the Exchange Offer, Cetronic may become,
directly or indirectly, a wholly owned subsidiary of Socket, and the holders
of Cetronic Shares will receive newly issued shares of Common Stock, par
value $0.001 per share, of Socket (the "Socket Common Stock");
WHEREAS, the Board of Directors of Cetronic has approved the Exchange
Offer and recommended that all the stockholders of Cetronic tender their
Cetronic Shares into the Exchange Offer;
WHEREAS, the Board of Directors of Socket has approved this Agreement
and recommended that the stockholders of Socket vote to adopt this Agreement
upon the terms and subject to the conditions contained herein;
NOW THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements herein contained and intending to be legally bound
hereby, the parties hereto hereby agree as follows:
SECTION 1.01 CLOSING. Provided that this Agreement shall not have
been terminated in accordance with Section 7.01, as promptly as practicable
after the satisfaction or, if permissible and effected as provided in Section
7.04, waiver of the Exchange Offer Conditions (as hereinafter defined) (or
such other date as may be agreed to in writing by Cetronic and Socket), a
closing (the "Closing") will be held at the offices of Wilson Sonsini
Goodrich & Rosati, Professional Corporation, Palo Alto, California, or such
other location as the parties may mutually agree (the date and time of such
Closing, or such later date and time as shall be agreed by the parties, being
the "Closing Date" and the "Closing Time," respectively).
SECTION 1.02 THE EXCHANGE OFFER.
(a) Provided that this Agreement shall not have been terminated
in accordance with Section 7.01, Socket shall commence the Exchange Offer on
or as soon as practicable after the Registration Statement Effective Date
(the "Exchange Offer Commencement Date") as contemplated by the Disclosure
Documents (as hereinafter defined) and otherwise in accordance with
applicable Laws. Pursuant to the Exchange Offer, Socket shall offer to
exchange for each Cetronic Share, subject to the conditions set forth below,
that number of shares of Socket Common Stock equal to the quotient obtained
by dividing (i) the quotient obtained by dividing (A) the quotient obtained
by dividing SEK 90,720,000 by the average exchange rate for the U.S. dollar
against the Swedish krona based on the Noon Buying Rate (as defined in
Section 8.03 hereof) during the Measurement Period
<PAGE>
Combination Agreement By and Between
Socket Communications, Inc. and
Cetronic Aktiebolag [Publ]
Dated as of June 12, 1997
Page 2
(as defined below) (the "Aggregate Purchase Price") by (B) the Applicable
Socket Share Valuation Price (as defined below); by (ii) the total number of
Cetronic Shares outstanding; provided, that the Aggregate Purchase Price
shall be reduced to the extent (i) that on the business day immediately
preceding the Exchange Offer Commencement Date there remain any unpaid shares
of Class B Common Stock and (ii) any portion of the Cetronic convertible
notes referred to in Section 5.15 hereof remain unconverted on the initial
Expiration Date (as defined below). For purposes of this Agreement, the
"Applicable Socket Share Valuation Price" means 80% of the average closing
sale price of the Socket Common Stock on the OTC Bulletin Board for the
period (the "Measurement Period") which is the twenty (20) trading days
ending on the fifth trading day immediately prior to the initial Expiration
Date (as defined below) (the "Socket Share Valuation Price"); provided, that
if the Socket Share Valuation Price is less than $0.75, the Applicable Socket
Share Valuation Price shall be $0.75; provided, further, that if the Socket
Share Valuation Price is greater than $2.25, the Applicable Socket Share
Valuation Price shall be $2.25. The obligation of Socket to accept for
payment and pay for Cetronic Shares tendered pursuant to the Exchange Offer
shall be subject only to this Agreement not having been terminated pursuant
to Section 7.01 and the satisfaction or waiver, if permissible and effected
as provided in Section 7.04, of (i) the condition that a number of Cetronic
Shares representing more than 90% of the number of shares and voting power of
the then outstanding Cetronic Shares shall have been validly tendered and not
withdrawn prior to the expiration of the Exchange Offer (the "Minimum
Condition"), (ii) the condition that this Agreement shall have been adopted
by the requisite affirmative vote of the stockholders of Socket in accordance
with the DGCL (the "Socket Stockholder Approval Condition") and (iii) the
other conditions set forth in Article VI of this Agreement (together with the
Minimum Condition and the Socket Stockholder Approval Condition, the
"Exchange Offer Conditions"). The initial expiration date of the Exchange
Offer shall be the date which is twenty (20) Business Days after the Exchange
Offer Commencement Date (such date, as it may be extended from time to time
as hereinafter provided, the "Expiration Date") and, provided that a number
of Cetronic Shares representing more than 70% of the number of shares and
voting power of the then outstanding Cetronic Shares shall have been validly
tendered and not withdrawn prior to the initial Expiration Date and that this
Agreement shall not have been terminated in accordance with Section 7.01,
shall be extended by Socket from time to time thereafter until such time as
all of the Exchange Offer Conditions have been satisfied or waived; provided,
however that if the Minimum Condition is not satisfied on an Expiration Date
that occurs on or after the fifth Business Day immediately preceding the
Final Closing Date (as defined in Section 7.01(b) hereof), Socket may permit
the Exchange Offer to expire on such Expiration Date. Subject only to the
conditions set forth above, Socket shall accept for exchange and shall
exchange all Cetronic Shares validly tendered and not withdrawn pursuant to
the terms of the Exchange Offer at the earliest practicable time following
the Closing Time.
(b) Notwithstanding the provisions of Section 1.02(a) above,
each holder of Cetronic Shares may elect to receive, with respect to one
percent (1%) of the Cetronic Shares held by such stockholder tendered in the
Exchange Offer, in lieu of shares of Socket Common Stock in the Exchange
Offer, an amount in cash equal to the dollar value of the shares of Socket
Common Stock otherwise exchangeable for such Cetronic Shares in the Exchange
Offer based on the Applicable Socket Share Valuation Price.
(c) In the event of any reclassification, stock split or stock
dividend with respect to the Socket Common Stock, any change or conversion of
Socket Common Stock into other securities or any other dividend or
distribution with respect thereto (or if record date with respect to any of
the foregoing should occur) prior to the Closing, appropriate and
proportionate adjustments, if any, shall be made to the Applicable Socket
Share Valuation Price, and all references to the Applicable Socket Share
Valuation Price in this Agreement shall be deemed to be to such Applicable
Socket Share Valuation Price as so adjusted.
<PAGE>
Combination Agreement By and Between
Socket Communications, Inc. and
Cetronic Aktiebolag [Publ]
Dated as of June 12, 1997
Page 3
(d) Prior to or substantially contemporaneously with the
Exchange Offer Commencement Date, Socket shall file a Swedish language
prospectus (or Swedish language translations or summaries of the Joint Proxy
Statement (as defined herein) as may be necessary and appropriate in Sweden)
with the Financial Supervisory Authority (the "FSA"), as required in Sweden.
(e) As promptly as practicable after the Closing Time, Socket
shall cause there to be held a meeting of the holders of Cetronic Shares to
elect the Board of Directors of Cetronic so that members of the Cetronic
Board of Directors shall, subject to applicable Laws, be the same individuals
who comprise the whole Board of Directors of Socket; provided, that, if
applicable Laws prohibit such composition of the Board of Directors, then the
Cetronic Board of Directors shall be comprised so that the number of Socket
and Cetronic designees thereon shall be, as nearly as practicable, in the
same proportion as on the Socket Board of Directors.
(f) No fraction of a share of Socket Common Stock will be
issued, but in lieu thereof, each holder of Cetronic Shares who would
otherwise be entitled to a fraction of a share of Socket Common Stock (after
aggregating all fractional shares of Socket Common Stock to be received by
such holder) shall be entitled to receive from Socket an amount of cash
(rounded to the nearest whole cent) equal to the product of (i) such
fraction, multiplied by (ii) the Applicable Socket Share Valuation Price.
SECTION 1.03 DEPOSITARY. Socket shall appoint a Swedish bank or
broker reasonably satisfactory to Cetronic to act as depositary for the
Exchange Offer (the "Depositary").
SECTION 1.04 COMPULSORY ACQUISITION. (a) As soon as practicable
after the Closing Date, assuming that the Minimum Condition has been
satisfied and not waived, Socket may at its sole discretion, unless the
parties mutually agree that there is a more effective method of achieving the
objectives described in this Section 1.04 (in which case such method may be
used), contribute all of the Cetronic Shares owned by it to a newly formed
wholly-owned subsidiary organized under the laws of the Kingdom of Sweden
("Swedish Newco") in exchange for all of the capital stock of Swedish Newco,
and shall cause Swedish Newco to take all actions necessary and proper under
the Swedish Companies Act to commence a process leading to a compulsory
acquisition under Section 14:31 of the Swedish Companies Act to acquire all
the issued and outstanding Cetronic Shares not acquired by Socket pursuant to
the Exchange Offer.
(b) In the event of consummation of the Transactions following
the waiver of the Minimum Condition effected as provided in Section 7.04,
Socket may, at its sole discretion, conduct, directly or indirectly, such
other offers (including, without limitation, pursuant to open market
purchases) as are necessary to obtain, when aggregated with the number of
shares and vote of Cetronic Shares already owned by it, more than 90% of the
number of shares and voting power of the then outstanding Cetronic Shares.
Thereafter, Socket shall take the actions described in Section 1.04(a).
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF SOCKET
Except as set forth on the Disclosure Schedule delivered by Socket to
Cetronic prior to the execution of this Agreement (the "Socket Disclosure
Schedule"), Socket hereby represents and warrants to Cetronic as follows:
<PAGE>
Combination Agreement By and Between
Socket Communications, Inc. and
Cetronic Aktiebolag [Publ]
Dated as of June 12, 1997
Page 4
SECTION 2.01 ORGANIZATION AND QUALIFICATION; SUBSIDIARIES. Socket
has been duly organized, and is validly existing and in good standing under
the laws of the jurisdiction of its incorporation, and has the requisite
power and authority and all necessary governmental approvals to own, lease
and operate its properties and to carry on its business as it is now being
conducted, except where the failure to be so organized, existing or in good
standing or to have such power, authority and governmental approvals would
not, individually or in the aggregate, have a Socket Material Adverse Effect
(defined below). Socket does not own, directly or indirectly, any capital
stock or other equity interest of any corporation or have any direct or
indirect equity or ownership interest in any other business, whether
organized as a corporation, partnership, joint venture or otherwise. Socket
is duly qualified or licensed to do business, and is in good standing, in
each jurisdiction where the character of the properties owned, leased or
operated by it or the nature of its business makes such qualification or
licensing necessary, except for such failures to be so qualified or licensed
and in good standing that would not, individually or in the aggregate, have a
Socket Material Adverse Effect. For purposes of this Agreement, "Socket
Material Adverse Effect" means any change in or effect on the business of
Socket that is, or is reasonably likely to be, materially adverse to the
business, assets (including intangible assets), liabilities (contingent or
otherwise), condition (financial or otherwise) or results of operations of
Socket. Socket has made available to Cetronic complete and correct copies of
the certificate of incorporation and bylaws of Socket, in each case as
amended to date.
SECTION 2.02 CAPITALIZATION. The authorized capital stock of Socket
consists of (a) 15,000,000 shares of Socket Common Stock and (b) 3,000,000
shares of preferred stock, l,000,000 shares of which are Series A Preferred
Stock (the "Socket Series A Preferred Stock"). As of the Business Day
immediately preceding the date of this Agreement, (i) 5,380,937 shares of
Socket Common Stock were issued and outstanding, all of which were validly
issued and fully paid and nonassessable, (ii) 381,517 shares of Socket Common
Stock were reserved for issuance upon exercise of stock options ("Socket
Options") granted pursuant to Socket's 1995 Stock Plan (the " 1995 Plan") and
Socket's 1993 Stock Option/Stock Issuance Plan (the " 1993 Plan" and together
with the 1995 Plan, the "Socket Stock Option Plans"), (iv) 236,426 shares of
Socket Common Stock were reserved for issuance upon exercise of future grants
of stock options under the Socket Stock Option Plans, (vi) 757,590 shares of
Socket Common Stock were reserved for issuance upon exercise of current
warrants outstanding (the "Socket Warrants"), and (vii) 4,052 shares of
Socket Series A Preferred Stock were issued and outstanding, all of which
were validly issued, fully paid and nonassessable. Except for the Socket
Options granted pursuant to the Socket Stock Option Plans and the Socket
Warrants or pursuant to agreements or arrangements described in Section 2.02
of the Socket Disclosure Schedule, there are no options, warrants or other
rights, agreements, arrangements or commitments of any character to which
Socket is a party or by which Socket is bound relating to the issued or
unissued capital stock of Socket or obligating Socket to issue or sell any
shares of capital stock of, or other equity interests in, Socket. All shares
of Socket Common Stock subject to issuance as aforesaid, upon issuance prior
to the Closing Time on the terms and conditions specified in the instruments
pursuant to which they are issuable, will be duly authorized, validly issued,
fully paid and nonassessable. The shares of Socket Common Stock to be issued
pursuant to the Transactions will be duly authorized, validly issued, fully
paid and non-assessable. Except as set forth in Section 2.02 of the Socket
Disclosure Schedule, there are no outstanding contractual obligations of
Socket to repurchase, redeem or otherwise acquire any shares of Socket Common
Stock. Except as set forth in Section 2.02 of the Socket Disclosure
Schedule, there are no material outstanding contractual obligations of Socket
to provide funds to, or make any investment (in the form of a loan, capital
contribution or otherwise) in, any other person.
<PAGE>
Combination Agreement By and Between
Socket Communications, Inc. and
Cetronic Aktiebolag [Publ]
Dated as of June 12, 1997
Page 5
SECTION 2.03 AUTHORITY RELATIVE TO THIS AGREEMENT. Socket has all
necessary corporate power and authority to execute and deliver this Agreement
and to perform its obligations hereunder and to consummate the transactions
(including, without limitation, the Transactions) contemplated herein to be
consummated by Socket. The execution and delivery of this Agreement by
Socket and the consummation by Socket of such transactions have been duly and
validly authorized by all necessary corporate action and no other corporate
proceedings on the part of Socket are necessary to authorize this Agreement
or to consummate such transactions (other than the adoption of this Agreement
by the requisite affirmative vote of the stockholders of Socket as required
by the DGCL). This Agreement has been duly authorized and validly executed
and delivered by Socket and constitutes a legal, valid and binding obligation
of Socket, enforceable against Socket in accordance with its terms. Socket
has taken all appropriate actions so that the restrictions on business
combinations contained in Section 203 of the DGCL will not apply with respect
to or as a result of the Transactions.
SECTION 2.04 NO CONFLICT; REQUIRED FILINGS AND CONSENTS.
(a) The execution and delivery of this Agreement by Socket do
not, and the performance of this Agreement by Socket will not, (i) conflict
with or violate any provision of the Restated Certificate of Incorporation or
By-Laws of Socket, (ii) assuming that all consents, approvals, authorizations
and other actions described in Section 2.04(b) have been obtained and all
filings and obligations described in Section 2.04(b) have been made, conflict
with or violate any foreign or domestic law, statute, ordinance, rule,
regulation, treaty, directive, order, judgment or decree ("Law") applicable
to Socket or by which any property or asset of Socket is bound or affected,
or (iii) except as set forth in Section 2.04(a) of the Socket Disclosure
Schedule, result in any breach of or constitute a default (or an event which
with notice or lapse of time or both would become a default) under, or give
to others any right of termination, amendment, acceleration or cancellation
of, or result in the creation of a lien or other encumbrance on any property
or asset of Socket pursuant to, any note, bond, mortgage, indenture,
contract, agreement, lease, license, permit, franchise or other instrument or
obligation, except, with respect to clauses (ii) and (iii), for any such
conflicts, violations, breaches, defaults, or other occurrences which would
neither, individually or in the aggregate, (A) have a Socket Material Adverse
Effect nor (B) prevent or materially delay the performance of this Agreement
by Socket.
(b) The execution and delivery of this Agreement by Socket do
not, and the performance of this Agreement by Socket will not, require any
consent, approval, authorization or permit of, or filing with or notification
to, any domestic or foreign governmental or regulatory authority
("Governmental Entity"), except for (i) applicable requirements of the FSA,
the Securities Act of 1933, as amended (together with the rules and
regulations promulgated thereunder, the "Securities Act"), the NASD, the
filing of a request with the Stockholm District Court with regard to the
compulsory acquisition described in Section 1.04, and as set forth in Section
2.04(b) of the Socket Disclosure Schedule and (ii) where failure to obtain
such consents, approvals, authorizations or permits, or to make such filings
or notifications, would not (A) prevent or materially delay consummation of
the Transactions, (B) otherwise prevent Socket from performing its material
obligations under this Agreement, and (C) individually or in the aggregate,
have a Socket Material Adverse Effect.
SECTION 2.05 PERMITS; COMPLIANCE. Socket is in possession of all
franchises, grants, authorizations, licenses, permits, easements, variances,
exceptions, consents, certificates, approvals and orders of any Governmental
Entity necessary for Socket to own, lease and operate its properties or to
carry on its business as it is now being conducted (the "Socket Permits"),
except where the failure to have, or the suspension or cancellation of, any
of the Socket Permits would neither, individually or in the aggregate, (A)
have a Socket Material Adverse Effect nor (B) prevent or materially delay the
performance of this Agreement by Socket, and,
<PAGE>
Combination Agreement By and Between
Socket Communications, Inc. and
Cetronic Aktiebolag [Publ]
Dated as of June 12, 1997
Page 6
as of the date of this Agreement, no suspension or cancellation of any of the
Socket Permits is pending or, to the actual knowledge of the executive
officers of Socket, threatened, except where the failure to have, or the
suspension or cancellation of, any of the Socket Permits would neither,
individually or in the aggregate, (A) have a Socket Material Adverse Effect
nor (B) prevent or materially delay the performance of this Agreement by
Socket. Socket is not in conflict with, or in default or violation of, (i)
any Law applicable to Socket or by which any property or asset of Socket is
bound or affected or (ii) any Socket Permits, except for any such conflicts,
defaults or violations that would neither, individually or in the aggregate,
(A) have a Socket Material Adverse Effect nor (B) prevent or materially delay
the performance of this Agreement by Socket.
SECTION 2.06 SEC FILINGS; FINANCIAL STATEMENTS.
(a) Socket has filed all forms, reports and documents required to
be filed by it under the Securities Exchange Act of 1934, as amended
(together with the rules and regulations promulgated thereunder, the
"Exchange Act") since January 1, 1993 through the date of this Agreement
(collectively, the "Socket SEC Reports"). The Socket SEC Reports (i) were
prepared in accordance with the requirements of the Exchange Act and (ii) did
not at the time they were filed contain any untrue statement of a material
fact or omit to state a material fact required to be stated therein or
necessary in order to make the statements made therein, in the light of the
circumstances under which they were made, not misleading.
(b) Each of the financial statements (including, in each case,
any notes thereto) contained in the Socket SEC Reports was prepared in
accordance with United States generally accepted accounting principles
applied on a consistent basis throughout the periods indicated (except as may
be indicated in the notes thereto) and each presented fairly, in all material
respects, the financial position of Socket as at the respective dates thereof
and the consolidated operating results for the respective periods indicated
therein, except as otherwise noted therein (subject, in the case of unaudited
statements, to normal and recurring year-end adjustments which were not and
are not expected, individually or in the aggregate, to have a Socket Material
Adverse Effect).
(c) Except as and to the extent set forth on the balance sheet
of Socket as of December 31, 1996, including the notes thereto, Socket has no
liabilities or obligations of any nature (whether accrued, absolute,
contingent or otherwise) that would be required to be reflected on a balance
sheet or in notes thereto prepared in accordance with United States generally
accepted accounting principles, except for liabilities or obligations
incurred in the ordinary course of business since December 31, 1996 that
would neither, individually or in the aggregate, (A) have a Socket Material
Adverse Effect nor (B) prevent or materially delay the performance of this
Agreement by Socket.
SECTION 2.07 ABSENCE OF CERTAIN CHANGES OR EVENTS. Since January 1,
1997, except as contemplated by or as disclosed in this Agreement or as set
forth in Section 2.07 of the Socket Disclosure Schedule, Socket has conducted
its business only in the ordinary course and in a manner consistent with past
practice and, since such date, there has not been (a) any Socket Material
Adverse Effect, (b) any event that could reasonably be expected to prevent or
materially delay the performance of this Agreement by Socket, (c) any
material change by Socket in its accounting methods, principles or practices,
(d) any declaration, setting aside or payment of any dividend or distribution
in respect of the shares of Socket Common Stock or any redemption, purchase
or other acquisition of any of Socket's securities, or (e) any increase in
the compensation or benefits or establishment of any bonus, insurance,
severance, deferred compensation, pension, retirement, profit sharing, stock
option (including, without limitation, the granting of stock options, stock
appreciation rights, performance awards or restricted stock awards), stock
purchase or other employee benefit plan, or any other increase in the
compensation
<PAGE>
Combination Agreement By and Between
Socket Communications, Inc. and
Cetronic Aktiebolag [Publ]
Dated as of June 12, 1997
Page 7
payable or to become payable to any executive officers of Socket except in
the ordinary course of business consistent with past practice or except as
required by applicable Law.
SECTION 2.08 EMPLOYEE BENEFIT PLANS; LABOR MATTERS.
(a) With respect to each material employee benefit plan,
program, arrangement and contract (including, without limitation, any
"employee benefit plan", as defined in section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA")), maintained or
contributed to by Socket or with respect to which Socket could incur material
liability under section 4069, 4212(c) or 4204 of ERISA (the "Socket Benefit
Plans"), Socket will make available to Cetronic, promptly after the date
hereof, a true and complete copy of (i) the most recent annual report (Form
5500) filed with the Internal Revenue Service (the "IRS"), (ii) such Socket
Benefit Plan, (iii) each trust agreement relating to such Socket Benefit
Plan, (iv) the most recent summary plan description for each Socket Benefit
Plan for which a summary plan description is required, (v) the most recent
actuarial report or valuation relating to a Socket Benefit Plan subject to
Title IV of ERISA and (vi) the most recent determination letter, if any,
issued by the IRS with respect to any Socket Benefit Plan qualified under
section 401 (a) of the Code.
(b) Except as set forth in Section 2.08(b) of the Socket
Disclosure Schedule, with respect to the Socket Benefit Plans, no event has
occurred and, to the knowledge of Socket, there exists no condition or set of
circumstances in connection with which Socket could be subject to any
liability under the terms of such Socket Benefit Plans, ERISA, the Code or
any other applicable Law which would have a Socket Material Adverse Effect).
(c) All contributions or premiums due from Socket with respect
to any of the Socket Benefit Plans have been made as required under ERlSA or
have been accrued on Socket's financial statements as of March 31, 1997, or
will be made prior to the Closing. Each Socket Benefit Plan has been
maintained in compliance with its terms and with the requirements prescribed
by any and all statutes, orders, rules and regulations, including, without
limitation, ERISA and the Code, which are applicable to such Socket Benefit
Plans, except as would not have a Socket Material Adverse Effect.
(d) Except as set forth in Section 2.08(d) of the Socket
Disclosure Schedule, Socket is not a party to any collective bargaining or
other labor union contract applicable to persons employed by Socket and no
collective bargaining agreement or other labor union contract is being
negotiated by Socket. As of the date of this Agreement, there is no labor
dispute, strike or work stoppage against Socket pending or threatened in
writing which may interfere with the business activities of Socket, except
where such dispute, strike or work stoppage would not have a Socket Material
Adverse Effect. As of the date of this Agreement, to the knowledge of
Socket, neither Socket nor its representatives or employees has committed any
unfair labor practices in connection with the operation of the respective
businesses of Socket, and there is no charge or complaint against Socket by
the National Labor Relations Board or any comparable state or foreign agency
pending or threatened in writing, except where such unfair labor practice,
charge or complaint would not have a Socket Material Adverse Effect.
(e) Socket has made available to Cetronic true and complete (i)
copies of all severance and employment agreements with directors, officers or
employees of Socket; (ii) copies of all severance programs and policies of
Socket or relating to its employees; and (iii) copies of all plans, programs,
agreements and other arrangements of Socket with or relating to its employees
which contain change of control provisions.
<PAGE>
Combination Agreement By and Between
Socket Communications, Inc. and
Cetronic Aktiebolag [Publ]
Dated as of June 12, 1997
Page 8
(f) Except as provided in Section 2.08 of the Socket Disclosure
Schedule or as otherwise required by Law, no Socket Benefit Plan provides
retiree medical or retiree life insurance benefits to any person.
SECTION 2.09 CONTRACTS; DEBT INSTRUMENTS. Except as disclosed in
Section 2.09 of the Socket Disclosure Schedule, there is no contract or
agreement that is material to the business, financial condition or results of
operations of Socket (each, a "Socket Material Contract"). Socket is not in
violation of or in default under (nor does there exist any condition which
with the passage of time or the giving of notice would cause such a violation
of or default under) any loan or credit agreement, note, bond, mortgage,
indenture or lease, or any other contract, agreement, arrangement or
understanding to which it is a party or by which it or any of its properties
or assets is bound, except for violations or defaults that would not,
individually or in the aggregate, result in a Socket Material Adverse Effect.
SECTION 2.10 LITIGATION. Except as disclosed in Section 2.10 of the
Socket Disclosure Schedule, there is no suit, claim, action, proceeding or
investigation pending or threatened in writing against Socket before any
Governmental Entity that, individually or in the aggregate, is reasonably
likely to have a Socket Material Adverse Effect. Except as disclosed in
Section 2.10 of the Socket Disclosure Schedule, Socket is not subject to any
outstanding Order, writ, injunction or decree which, insofar as can be
reasonably foreseen, individually or in the aggregate, would have a Socket
Material Adverse Effect
SECTION 2.11 ENVIRONMENTAL MATTERS. Except as disclosed in Section
2.11 of the Socket Disclosure Schedule or as would not, individually or in
the aggregate, have a Socket Material Adverse Effect:
(a) Socket (i) is in compliance with all applicable
Environmental Laws (defined below), (ii) holds all Environmental Permits
(defined below), and (iii) is in compliance with its Environmental Permits.
(b) Socket has not received any written request for
information, or been notified that it is a potentially responsible party,
under CERCLA (defined below) or any similar state, local or foreign Law.
(c) Socket has not entered into or agreed to any consent decree
or order or is subject to any judgment, decree or judicial order relating to
compliance with Environmental Laws, Environmental Permits or the
investigation, sampling, monitoring, treatment, remediation, removal or
cleanup of Hazardous Materials (defined below), and to the best knowledge of
Socket, no investigation, litigation or other proceeding is pending or
threatened in writing with respect thereto.
(d) None of the real property owned or leased by Socket is
listed or, to the best knowledge of Socket, proposed for listing on the
"National Priorities List" under CERCLA, as updated through the date hereof,
or any similar state or foreign list of sites requiring investigation or
cleanup.
For purposes of this Agreement:
"CERCLA" means the Comprehensive Environmental Response, Compensation
and Liability Act of 1980. as amended as of the date hereof.
"Environmental Laws" means any federal, state, local or foreign
statute, law, ordinance, regulation, rule, code or order and any enforceable
judicial or administrative interpretation thereof, including any judicial or
administrative order, consent decree or judgment, relating to pollution or
protection of the environment or natural
<PAGE>
Combination Agreement By and Between
Socket Communications, Inc. and
Cetronic Aktiebolag [Publ]
Dated as of June 12, 1997
Page 9
resources, including, without limitation, those relating to the use,
handling, transportation, treatment, storage, disposal, release or discharge
of Hazardous Materials, as in effect as of the date hereof.
"Environmental Permits" means any permit, approval, identification
number, license and other authorization required under any applicable
Environmental Law.
"Hazardous Materials" means (a) any petroleum, petroleum products,
by-products or breakdown products, radioactive materials, asbestos-containing
materials or polychlorinated biphenyls or (b) any chemical, material or
substance defined or regulated as toxic or hazardous or as a pollutant or
contaminant or waste under any applicable Environmental Law.
SECTION 2.12 TRADEMARKS, PATENTS AND COPYRIGHTS. Except as set
forth in Section 2.12 of the Socket Disclosure Schedule, Socket owns or
possesses adequate licenses or other legal rights to use all patents, patent
rights, trademarks, trademark rights, trade names, trade dress, trade name
rights, copyrights, servicemarks, trade secrets, applications for trademarks
and for servicemarks, mask works, know-how and other proprietary rights and
information used or held for use in connection with the business of Socket as
conducted since inception, and as currently conducted or as contemplated to
be conducted, and Socket is unaware of any assertion or claim challenging the
validity of any of the foregoing. The conduct of the business of Socket as
conducted since inception, as currently conducted and as contemplated to be
conducted did not, does not and will not infringe in any way any patent,
patent right, license, trademark, trademark right, trade dress, trade name,
trade name right, service mark, mask work or copyright of any third party
that, individually or in the aggregate, could have a Socket Material Adverse
Effect. To Socket's knowledge, there are no infringements of any proprietary
rights owned by or licensed by or to Socket that, individually or in the
aggregate, could have a Socket Material Adverse Effect.
SECTION 2.13 TAXES. Except for such matters that would not have a
Socket Material Adverse Effect, (a) Socket has timely filed or will timely
file all returns and reports required to be filed by them with any taxing
authority with respect to Taxes for any period ending on or before the
Closing Time, taking into account any extension of time to file granted to or
obtained on behalf of Socket, (b) all Taxes shown to be payable on such
returns or reports that are due prior to the Closing Time have been paid or
will be paid, (c) as of the date hereof, no deficiency for any material
amount of Tax has been asserted or assessed by a taxing authority against
Socket, and (d) Socket has provided adequate reserves in their financial
statements for any Taxes that have not been paid, whether or not shown as
being due on any returns. As used in this Agreement, "Taxes" shall mean any
and all taxes, fees, levies, duties, tariffs, imposts, and other charges of
any kind (together with any and all interest, penalties, additions to tax and
additional amounts imposed with respect thereto) imposed by any government or
taxing authority, including, without limitation: taxes or other charges on or
with respect to income, franchises, windfall or other profits, gross
receipts, property, sales, use, capital stock, payroll, employment, social
security, workers' compensation, unemployment compensation, or net worth;
taxes or other charges in the nature of excise, withholding, ad valorem,
stamp, transfer, value added, or gains taxes; license, registration and
documentation fees; and customers' duties, tariffs, and similar charges.
SECTION 2.14 BROKERS. No broker, finder or investment banker is
entitled to any brokerage, finder's or other fee or commission in connection
with the Transactions based upon arrangements made by or on behalf of Socket.
<PAGE>
Combination Agreement By and Between
Socket Communications, Inc. and
Cetronic Aktiebolag [Publ]
Dated as of June 12, 1997
Page 10
SECTION 2.15 INTERESTED PARTY TRANSACTIONS. Except as disclosed in
the Socket SEC Reports filed prior to the date of this Agreement, no officer
or director of Socket or any "affiliate" or "associate" (as those terms are
defined in Rule 405 promulgated under the Securities Act) of any such person
has had, either directly or indirectly, a material interest in: (i) any
person or entity which purchases from or sells, licenses or furnishes to
Socket any goods, property, technology or intellectual or other property
rights or services; or (ii) any oral or written contract or agreement to
which Socket is a party or by which it may be bound or affected.
SECTION 2.16 OWNERSHIP OF PROPERTY. Except as set forth in Section
2.16 of the Socket Disclosure Schedule, Socket owns its real and personal
property free and clear of all security interests, mortgages, liens, charges,
claims, options and encumbrances. All real and personal property of Socket
is in generally good repair and is operational and usable in the operations
of Socket, subject to ordinary wear and tear. To Socket's knowledge, Socket
is not in violation of any zoning, building or safety ordinance, regulation
or requirement or other law or regulation applicable to the operation of
owned or leased properties (the violation of which would have a Socket
Material Adverse Effect), or has received any notice of violation with which
it has not complied, except where such violation would not have a Socket
Material Adverse Effect.
SECTION 2.17 MATERIAL RELATIONSHIPS. Except as set forth in Section
2.17 of the Socket Disclosure Schedule, Socket has not received notice that
any of its officers or key employees, and, to its knowledge has not received
notice that any material customer or supplier or other person having a
material business relationship with Socket, that such officer, employee,
customer, supplier or person presently intends to terminate its relationship
with Socket.
SECTION 2.18 DISCLOSURE. No representation or warranty made by
Socket in this Agreement, nor any document, written information, statement,
financial statement, certificate or exhibit prepared and furnished or to be
prepared and furnished by Socket or its representatives pursuant hereto or in
connection with the transactions contemplated hereby, when taken together,
contains any untrue statement of a material fact, or omits to state a
material fact necessary to make the statements or facts contained herein or
therein not misleading in light of the circumstances under which they were
furnished.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF CETRONIC
Except as set forth on the Disclosure Schedule delivered by Cetronic
to Socket prior to the execution of this Agreement (the "Cetronic Disclosure
Schedule"), Cetronic hereby represents and warrants to Socket that:
SECTION 3.01 ORGANIZATION AND QUALIFICATION; SUBSIDIARIES. Each of
Cetronic and each subsidiary of Cetronic set forth on Schedule 3.01 of the
Cetronic Disclosure Schedule (the "Cetronic Subsidiaries") has been duly
organized and is validly existing and in good standing under the laws of the
jurisdiction of its incorporation or organization, as the case may be, and
has the requisite power and authority and all necessary governmental
approvals to own, lease and operate its properties and to carry on its
business as it is now being conducted, except where the failure to be so
organized, existing or in good standing or to have such power, authority and
governmental approvals would not, individually or in the aggregate, have a
Cetronic Material Adverse Effect (defined below). Section 3.01 of the
Cetronic Disclosure Schedule sets forth a correct and
<PAGE>
Combination Agreement By and Between
Socket Communications, Inc. and
Cetronic Aktiebolag [Publ]
Dated as of June 12, 1997
Page 11
complete list of the Cetronic Subsidiaries, the holders of record of each
Cetronic Subsidiary's outstanding equity, and a correct and complete list of
each jurisdiction in which each Cetronic Subsidiary is duly qualified and in
good standing to do business. Other than the Cetronic Subsidiaries, Cetronic
does not own, directly or indirectly, any capital stock or other equity
interest of any corporation or have any direct or indirect equity or
ownership interest in any other business, whether organized as a corporation,
partnership, joint venture or otherwise. Each of Cetronic and the Cetronic
Subsidiaries is duly qualified or licensed to do business, and is in good
standing, in each jurisdiction where the character of the properties owned,
leased or operated by it or the nature of its business makes such
qualification or licensing necessary, except for such failures to be so
qualified or licensed and in good standing that would not, individually or in
the aggregate, have a Cetronic Material Adverse Effect. For purposes of this
Agreement, "Cetronic Material Adverse Effect" means any change in or effect
on the business of Cetronic and the Cetronic Subsidiaries that is, or is
reasonably likely to be, materially adverse to the business, assets
(including intangible assets), liabilities (contingent or otherwise),
condition (financial or otherwise) or results of operations of Cetronic and
the Cetronic Subsidiaries taken as a whole. Cetronic has made available to
Socket complete and correct copies of the articles of association and all
other corporate organizational documents of Cetronic and each of the Cetronic
Subsidiaries, in each case as amended to date.
SECTION 3.02 CAPITALIZATION. The authorized share capital of
Cetronic consists of a minimum of SEK 1,000,000 and a maximum of SEK
4,000,000 to be issued in Cetronic Class A Shares and/or Cetronic Class B
Shares. As of the date hereof, (i) 1,600,000 Cetronic Class A Common Shares
are issued and outstanding, all of which are validly issued and fully paid
and (ii) 800,000 Cetronic Class B Common Shares are issued and outstanding,
all of which are validly issued and fully paid. Except as set forth in
Section 3.02 of the Cetronic Disclosure Schedule, there are no warrants or
other rights, arrangements or commitments of any character to which Cetronic
is a party or by which Cetronic is bound relating to the issued or unissued
capital stock of Cetronic or any Cetronic Subsidiary or obligating Cetronic
or any Cetronic Subsidiary to issue or sell any shares of capital stock of,
or other equity interests in, Cetronic or any Cetronic Subsidiary. Except as
set forth in Section 3.02 of the Cetronic Disclosure Schedule, there are no
outstanding contractual obligations of Cetronic or any Cetronic Subsidiary to
redeem or otherwise acquire any Cetronic Shares or any capital stock of any
Cetronic Subsidiary. Each outstanding share of capital stock of each
Cetronic Subsidiary is duly authorized, validly issued and fully paid and
each such share is owned by Cetronic or another Cetronic Subsidiary free and
clear of all security interests, liens, claims, pledges, options, rights of
first refusal, agreements, limitations on Cetronic's or such other Cetronic
Subsidiary's voting rights, charges and other encumbrances of any nature
whatsoever, except where failure to own such shares free and clear would not,
individually or in the aggregate, have a Cetronic Material Adverse Effect.
Except as set forth in Section 3.02 of the Cetronic Disclosure Schedule,
there are no material outstanding contractual obligations of Cetronic or any
Cetronic Subsidiary to provide funds to, or make any investment (in the form
of a loan, capital contribution or otherwise) in, any Cetronic Subsidiary or
any other person, other than guarantees by Cetronic of any indebtedness of
any Cetronic Subsidiary.
SECTION 3.03 AUTHORITY RELATIVE TO THIS AGREEMENT. Cetronic has all
necessary corporate power and authority to execute and deliver this Agreement
and to perform its obligations hereunder and to consummate the transactions
(including, without limitation, the Transactions) contemplated herein to be
consummated by Cetronic. The execution and delivery of this Agreement by
Cetronic and the consummation by Cetronic of such transactions have been duly
and validly authorized by all necessary corporate action and no other
corporate proceedings on the part of Cetronic are necessary to authorize this
Agreement or to consummate such transactions. This Agreement has been duly
authorized and validly executed and delivered by Cetronic and constitutes a
legal, valid and binding obligation of Cetronic, enforceable against Cetronic
in accordance with its terms.
<PAGE>
Combination Agreement By and Between
Socket Communications, Inc. and
Cetronic Aktiebolag [Publ]
Dated as of June 12, 1997
Page 12
SECTION 3.04 NO CONFLICT; REQUIRED FILINGS AND CONSENTS.
(a) The execution and delivery of this Agreement by Cetronic do
not, and the performance of this Agreement by Cetronic will not, (i) conflict
with or violate any provision of the Articles of Association or other
corporate organization documents of Cetronic or any equivalent organizational
documents of any Cetronic Subsidiary, (ii) assuming that all consents,
approvals, authorizations and other actions described in Section 3.04(b) have
been obtained and all filings and obligations described in Section 3.04(b)
have been made, conflict with or violate any Law applicable to Cetronic or
any Cetronic Subsidiary or by which any property or asset of Cetronic or any
Cetronic Subsidiary is bound or affected, or (iii) result in any breach of or
constitute a default (or an event which with notice or lapse of time or both
would become a default) under, or give to others any right of termination,
amendment, acceleration or cancellation of, or result in the creation of a
lien or other encumbrance on any property or asset of Cetronic or any
Cetronic Subsidiary pursuant to, any note, bond, mortgage, indenture,
contract, agreement, lease, license, permit, franchise or other instrument or
obligation, including without limitation any grants or subsidized loans or
other subsidies from state or local Governmental Entities, except, with
respect to clauses (ii) and (iii), for any such conflicts, violations,
breaches, defaults, or other occurrences which would neither, individually or
in the aggregate, (A) have a Cetronic Material Adverse Effect nor (B) prevent
or materially delay the performance of this Agreement by Cetronic.
(b) The execution and delivery of this Agreement by Cetronic do
not, and the performance of this Agreement by Cetronic will not, require any
consent, approval, authorization or permit of, or filing with or notification
to, any Governmental Entity, except (i) for applicable requirements of the
FSA, the Securities Act, the NASD, the filing of a request with the Stockholm
District Court with regard to the compulsory acquisition described in Section
1.05, and (ii) where failure to obtain such consents, approvals,
authorizations or permits, or to make such filings or notifications, would
not (A) prevent or materially delay consummation of the Transactions, (B)
otherwise prevent Cetronic from performing its material obligations under
this Agreement, and (C) individually or in the aggregate, have a Cetronic
Material Adverse Effect.
SECTION 3.05 PERMITS; COMPLIANCE. Each of Cetronic and the Cetronic
Subsidiaries is in possession of all franchises, grants, authorizations,
licenses, permits, easements, variances, exceptions, consents, certificates,
approvals and orders of any Governmental Entity necessary for Cetronic or any
Cetronic Subsidiary to own, lease and operate its properties or to carry on
its business as it is now being conducted (the "Cetronic Permits"), except
where the failure to have, or the suspension or cancellation of, any of the
Cetronic Permits would neither, individually or in the aggregate, (A) have a
Cetronic Material Adverse Effect nor (B) prevent or materially delay the
performance of this Agreement by Cetronic, and, as of the date of this
Agreement, no suspension or cancellation of any of the Cetronic Permits is
pending or, to the actual knowledge of the executive officers of Cetronic,
threatened, except where the failure to have, or the suspension or
cancellation of, any of the Cetronic Permits would neither, individually or
in the aggregate, (A) have a Cetronic Material Adverse Effect nor (B) prevent
or materially delay the performance of this Agreement by Cetronic. Neither
Cetronic nor any Cetronic Subsidiary is in conflict with, or in default or
violation of, (i) any Law applicable to Cetronic or any Cetronic Subsidiary
or by which any property or asset of Cetronic or any Cetronic Subsidiary is
bound or affected or (ii) any Cetronic Permits, except for any such
conflicts, defaults or violations that would neither, individually or in the
aggregate, (A) have a Cetronic Material Adverse Effect nor (B) prevent or
materially delay the performance of this Agreement by Cetronic.
<PAGE>
Combination Agreement By and Between
Socket Communications, Inc. and
Cetronic Aktiebolag [Publ]
Dated as of June 12, 1997
Page 13
SECTION 3.06 FINANCIAL STATEMENTS.
(a) Each of the consolidated financial annual accounts
(including, in each case, any notes thereto) of Cetronic since January 1,
1996 was prepared in accordance with Swedish generally accepted accounting
principles, in each case applied on a consistent basis throughout the periods
indicated (except as may be indicated in the notes thereto) and each
presented fairly, in all material respects, the consolidated financial
position of Cetronic and the consolidated Cetronic Subsidiaries as at the
respective dates thereof and the consolidated operating results for the
respective periods indicated therein, except as otherwise noted therein
(subject, in the case of unaudited statements, to normal and recurring
year-end adjustments which were not and are not expected, individually or in
the aggregate, to have a Cetronic Material Adverse Effect).
(b) Except as and to the extent set forth on the consolidated
balance sheet of Cetronic and the consolidated Cetronic Subsidiaries as of
December 31, 1996, including the notes thereto, neither Cetronic nor any of
the Cetronic Subsidiaries has any liabilities or obligations of any nature
(whether accrued, absolute, contingent or otherwise) that would be required
to be reflected on a balance sheet or in notes thereto prepared in accordance
with Swedish generally accepted accounting principles, except for liabilities
or obligations incurred in the ordinary course of business since December 31,
1996 that would neither, individually or in the aggregate, (A) have a
Cetronic Material Adverse Effect nor (B) prevent or materially delay the
performance of this Agreement by Cetronic.
SECTION 3.07 ABSENCE OF CERTAIN CHANGES OR EVENTS. Since January 1,
1997, except as contemplated by or as set forth in Section 3.07 of the
Cetronic Disclosure Schedule, Cetronic and the Cetronic Subsidiaries have
conducted their businesses only in the ordinary course and in a manner
consistent with past practice and, since such date, there has not been (a)
any Cetronic Material Adverse Effect, (b) any event that could reasonably be
expected to prevent or materially delay the performance of this Agreement by
Cetronic, (c) any material change by Cetronic in its accounting methods,
principles or practices, (d) any declaration, setting aside or payment of any
dividend or distribution in respect of the Cetronic Shares or any redemption,
purchase or other acquisition of any of Cetronic's securities, or (e) any
increase in the compensation or benefits or establishment of any bonus,
insurance, severance, deferred compensation, pension, retirement, profit
sharing, stock option (including, without limitation, the granting of stock
options, stock appreciation rights, performance awards or restricted stock
awards), or other employee benefit plan, or any other increase in the
compensation payable or to become payable to any executive officers of
Cetronic or any Cetronic Subsidiary except in the ordinary course of business
consistent with past practice or except as required by applicable law.
SECTION 3.08 EMPLOYEE BENEFIT PLANS; LABOR MATTERS.
(a) Cetronic has made available to Socket a true and complete
copy of each employee benefit plan, program, arrangement and contract
maintained by Cetronic or any Cetronic Subsidiary for the benefit of any
current or former employee, officer or director of Cetronic or any Cetronic
Subsidiary or with respect to which Cetronic or any Cetronic Subsidiary could
incur material liability (the "Cetronic Benefit Plans"), and each material
document prepared in connection with each Cetronic Benefit Plan.
(b) With respect to the Cetronic Benefit Plans, no event has
occurred and, to the knowledge of Cetronic, there exists no condition or set
of circumstances in connection with which Cetronic or any Cetronic Subsidiary
could be subject to any liability under the terms of such Cetronic Benefit
Plans or any applicable Law which would have a Cetronic Material Adverse
Effect.
<PAGE>
Combination Agreement By and Between
Socket Communications, Inc. and
Cetronic Aktiebolag [Publ]
Dated as of June 12, 1997
Page 14
(c) In addition to the foregoing, and except as would not have
a Cetronic Material Adverse Effect, with respect to each Cetronic Benefit
Plan:
(i) all employer and employee contributions to each
Cetronic Benefit Plan required by Law or by the terms of such Cetronic
Benefit Plan have been made, or if applicable, accrued in accordance with
normal accounting practices and a pro rata contribution for the period from
the date hereof to and including the Closing Date has been made or accrued in
accordance with normal accounting principles;
(ii) the fair market value of the assets of each funded
Cetronic Benefit Plan, the liability of each insurer for any Cetronic Benefit
Plan funded through insurance or the book reserve established for any
Cetronic Benefit Plan, together with any accrued contributions, is sufficient
to procure or provide for the accrued benefit obligations, as of the Closing
Date, with respect to all current and former participants in such plan
according to the actuarial assumptions and valuations most recently used to
determine employer contributions to such Cetronic Benefit Plan and no
transaction contemplated by this Agreement shall cause such assets or
insurance obligations to be less than such benefit obligations; and
(iii) each Cetronic Benefit Plan required to be registered
has been registered and has been maintained in good standing with applicable
regulatory authorities.
(d) Except as set forth in Section 3.08(d) of the Cetronic
Disclosure Schedule, neither Cetronic nor any Cetronic Subsidiary is a party
to any collective bargaining or other labor union contract applicable to
persons employed by Cetronic or any Cetronic Subsidiary and no collective
bargaining agreement or other labor union contract is being negotiated by
Cetronic or any Cetronic Subsidiary. As of the date of this Agreement, there
is no labor dispute, strike or work stoppage against Cetronic or any Cetronic
Subsidiary pending or threatened in writing that may interfere with the
respective business activities of Cetronic or any Cetronic Subsidiary, except
where such dispute, strike or work stoppage would not have a Cetronic
Material Adverse Effect. As of the date of this Agreement, to the knowledge
of Cetronic, none of Cetronic, any Cetronic Subsidiary, or their respective
representatives or employees, has committed any unfair labor practices in
connection with the operation of the respective businesses of Cetronic or any
Cetronic Subsidiary.
(e) Cetronic has made available to Socket, promptly after the
date hereof, true and complete (i) copies of all severance and employment
agreements with the officers of Cetronic and the Cetronic Subsidiaries (taken
as a whole); (ii) copies of all severance programs and policies of Cetronic
with or relating to its officers and (iii) copies of all plans, programs,
agreements and other arrangements of Cetronic and the Cetronic Subsidiaries
(taken as a whole) with or relating to their officers which contain change of
control provisions.
(f) Except as otherwise required by Law, no Cetronic Benefit
Plan provides retiree medical or retiree life insurance benefits to any
person.
SECTION 3.09 CONTRACTS; DEBT INSTRUMENTS. Except as disclosed in
Section 3.09 of the Cetronic Disclosure Schedule, there is no contract or
agreement that is material to the business, financial condition or results of
operations of Cetronic and the Cetronic Subsidiaries taken as a whole (each,
a "Cetronic Material Contract"). Neither Cetronic nor any Cetronic
Subsidiary is in violation of or in default under (nor does there exist any
condition which upon the passage of time or the giving of notice would cause
such a violation of or default under) any loan or credit agreement, note,
bond, mortgage, indenture or lease, or any other contract, agreement,
arrangement or understanding to which it is a party or by which it or any of
its properties or assets
<PAGE>
Combination Agreement By and Between
Socket Communications, Inc. and
Cetronic Aktiebolag [Publ]
Dated as of June 12, 1997
Page 15
is bound, including without limitation any grants or subsidized loans or
other subsidies from state or local Governmental Entities except for
violations or defaults that would not, individually or in the aggregate,
result in a Cetronic Material Adverse Effect.
SECTION 3.10 LITIGATION. Except as disclosed in Section 3.10 of the
Cetronic Disclosure Schedule, there is no suit, claim, action, proceeding or
investigation pending or threatened in writing against Cetronic or any
Cetronic Subsidiary before any Governmental Entity which, individually or in
the aggregate, is reasonably likely to have a Cetronic Material Adverse
Effect. Except as disclosed in the Section 3.10 of the Cetronic Disclosure
Schedule, in the case of any suit, claim, action, proceeding or investigation
relating to Cetronic's operations, or present or former personnel, there has
been no change since December 31, 1996 in the status of any such matters that
would be reasonably likely to have a Cetronic Material Adverse Effect.
Except as disclosed in the Cetronic Reports or in Section 3.10 of the
Cetronic Disclosure Schedule, neither Cetronic nor any Cetronic Subsidiary is
subject to any outstanding Order, writ, injunction or decree which, insofar
as can be reasonably foreseen, individually or in the aggregate, would have a
Cetronic Material Adverse Effect.
SECTION 3.11 ENVIRONMENTAL MATTERS. Except as disclosed in Section
3.11 the Cetronic Disclosure Schedule or as would not, individually or in the
aggregate, have a Cetronic Material Adverse Effect:
(a) Cetronic and the Cetronic Subsidiaries (i) are in
compliance with all applicable Environmental Laws, (ii) hold all
Environmental Permits, and (iii) are in compliance with its Environmental
Permits.
(b) None of Cetronic or any Cetronic Subsidiary has received
any written request for information, or been notified that it is a
potentially responsible party, under CERCLA or any similar state, local or
foreign Law.
(c) None of Cetronic or any Cetronic Subsidiary has entered
into or agreed to any consent decree or order or is subject to any judgment,
decree or judicial order relating to compliance with Environmental Laws,
Environmental Permits or the investigation, sampling monitoring, treatment,
remediation, removal or cleanup of Hazardous Materials, and to the best
knowledge of Cetronic, no investigation, litigation or other proceeding is
pending or threatened in writing with respect thereto.
(d) None of the real property owned or leased by Cetronic or
any Cetronic Subsidiary is listed or, to the best knowledge of Cetronic,
proposed for listing on the "National Priorities List" under CERCLA, as
updated through the date hereof, or any similar state or foreign list of
sites requiring investigation or cleanup.
SECTION 3.12 TRADEMARKS, PATENTS AND COPYRIGHTS. Except as set
forth in Section 3.12 of the Cetronic Disclosure Schedule, Cetronic and the
Cetronic Subsidiaries own or possess adequate licenses or other legal rights
to use all patents, patent rights, trademarks, trademark rights, trade names,
trade dress, trade name rights, copyrights, servicemarks, trade secrets,
applications for trademarks and for servicemarks, mask works, know-how and
other proprietary rights and information used or held for use in connection
with the business of Cetronic and the Cetronic Subsidiaries as conducted
since inception, and as currently conducted or as contemplated to be
conducted, and Cetronic is unaware of any assertion or claim challenging the'
validity of any of the foregoing. The conduct of the business of Cetronic and
the Cetronic Subsidiaries as conducted since inception, as currently
conducted and as contemplated to be conducted did not, does not and will not
infringe in any way any patent,
<PAGE>
Combination Agreement By and Between
Socket Communications, Inc. and
Cetronic Aktiebolag [Publ]
Dated as of June 12, 1997
Page 16
patent right, license, trademark, trademark right, trade dress, trade name,
trade name right, service mark, mask work or copyright of any third party
that, individually or in the aggregate, could have a Cetronic Material
Adverse Effect. To Cetronic's knowledge, there are no infringements of any
proprietary rights owned by or licensed by or to Cetronic or any Cetronic
Subsidiary that, individually or in the aggregate, could have a Cetronic
Material Adverse Effect.
SECTION 3.13 TAXES. Except for such matters that would not have a
Cetronic Material Adverse Effect, (a) Cetronic and its subsidiaries have
timely filed or will timely file all returns and reports required to be filed
by them with any taxing authority with respect to Taxes for any period ending
on or before the Closing Date, taking into account any extension of time to
file granted to or obtained on behalf of Cetronic and its subsidiaries, (b)
all Taxes shown to be payable on such returns or reports that are due prior
to the Closing Date have been paid or will be paid, (c) as of the date
hereof, no deficiency for any material amount of Tax has been asserted or
assessed by a taxing authority against Cetronic or its subsidiaries, and (d)
Cetronic and its subsidiaries have provided adequate reserves in their
financial statements for any Taxes that have not been paid, whether or not
shown as being due on any returns.
SECTION 3.14 INTERESTED PARTY TRANSACTIONS. Except as set forth in
Section 3.14 of the Cetronic Disclosure Schedule, no officer or director of
Cetronic or any ''affiliate'' or "associate" (as those terms are defined in
Rule 405 promulgated under the Securities Act) of any such person has had,
either directly or indirectly, a material interest in: (i) any person or
entity which purchases from or sells, licenses or furnishes to Cetronic or
any of the Cetronic Subsidiaries any goods, property, technology or
intellectual or other property rights or services; or (ii) any oral or
written contract or agreement to which Cetronic or any of the Cetronic
Subsidiaries is a party or by which it may be bound or affected.
SECTION 3.15 OWNERSHIP OF PROPERTY. Except or as set forth in
Section 3.15 of the Cetronic Disclosure Schedule, Cetronic and each of the
Cetronic Subsidiaries owns its real and personal property free and clear of
all security interests, mortgages, liens, charges, claims, options and
encumbrances. All real and personal property of Cetronic and each of the
Cetronic Subsidiaries is in generally good repair and is operational and
usable in the operations of Cetronic, subject to ordinary wear and tear.
Neither Cetronic nor any Cetronic Subsidiary is in violation of any zoning,
building or safety ordinance, regulation or requirement or other law or
regulation applicable to the operation of owned or leased properties (the
violation of which would have a Cetronic Material Adverse Effect), or has
received any notice of violation with which it has not complied, except where
such violation would not have a Cetronic Material Adverse Effect.
SECTION 3.16 MATERIAL RELATIONSHIPS. Except as set forth in Section
3.16 to the Cetronic Disclosure Schedule, Cetronic has not received written
notice that any of its officers or key employees, and to its knowledge has
not received notice, that any material customer or supplier or other person
having a material business relationship with Cetronic that such officer,
employee, customer, supplier or person presently intends to terminate its
relationship with Cetronic.
SECTION 3.17 DISCLOSURE. No representation or warranty made by
Cetronic in this Agreement, nor any document, written information, statement,
financial statement, certificate or exhibit prepared and furnished or to be
prepared and furnished by Cetronic or its representatives pursuant hereto or
in connection with the transactions contemplated hereby, when taken together,
contains any untrue statement of a material fact, or omits to state a
material fact necessary to make the statements or facts contained herein or
therein not misleading in light of the circumstances under which they were
furnished.
<PAGE>
Combination Agreement By and Between
Socket Communications, Inc. and
Cetronic Aktiebolag [Publ]
Dated as of June 12, 1997
Page 17
ARTICLE IV
COVENANTS
SECTION 4.01 CONDUCT OF BUSINESS BY SOCKET PENDING THE CLOSING.
Socket agrees that, between the date of this Agreement and the Closing Time,
except as contemplated by any provision of this Agreement, unless Cetronic
shall otherwise agree in writing, which agreement shall not be unreasonably
withheld or delayed, (1) the business of Socket shall be conducted only in,
and Socket shall not take any action except in, the ordinary course of
business consistent with past practice and (2) Socket shall use its
reasonable best efforts to keep available the services of such of the current
officers, significant employees and consultants of Socket and to preserve the
current relationships of Socket with such of the customers, suppliers and
other persons with which Socket has significant business relations as Socket
deems reasonably necessary in order to preserve substantially intact its
business organization. Except as contemplated by any provision of this
Agreement, the Board of Directors of Socket shall not (unless required by
applicable Laws or stock exchange regulations) cause or permit Socket to, and
shall neither cause nor permit any of Socket's affiliates (over which it
exercises control), or any of their officers, directors, employees and agents
to, between the date of this Agreement and the Closing Time, directly or
indirectly, do, or agree to do, any of the following, without the prior
written consent of Cetronic, which consent shall not be unreasonably withheld
or delayed:
(a) amend or otherwise change its Certificate of Incorporation
or By-laws or equivalent organizational documents;
(b) issue, sell, pledge, dispose of, grant, transfer, lease,
license, guarantee, encumber, or authorize the issuance, sale, pledge,
disposition, grant, transfer, lease, license, guarantee or encumbrance of,
(i) any shares of capital stock of Socket of any class, or securities
convertible or exchangeable or exercisable for any shares of such capital
stock, or any options, warrants or other rights of any kind to acquire any
shares of such capital stock, or any other ownership interest (including,
without limitation, any phantom interest), of Socket except for the issuance
of (A) a maximum of 381,517 shares of Socket Common Stock issuable pursuant
to the Socket Options outstanding on the date of this Agreement and the
issuance, in the ordinary course of business and consistent with past
practice, of the Socket Options to purchase a maximum of number of 500,000
shares of Socket Common Stock pursuant to the Socket Stock Option Plans in
effect on the date of this Agreement (which includes 300,000 shares subject
to stockholder approval at the Socket 1997 Annual Meeting of Stockholders)
and the shares of Socket Common Stock issuable pursuant to such Socket
Options, in accordance with the terms of the Socket Stock Option Plan (it
being understood that Socket may grant a significant number of Socket Options
in connection with hiring and retaining a new Chief Executive Officer, and
that any such grant shall be deemed to be in the ordinary course of business
consistent with past practice; provided, that any such grant shall be
reasonably acceptable to Cetronic); and (B) a number of shares (determined as
provided in the Certificate of Designations relating thereto) of Socket
Common Stock issuable upon conversion of 4,052 shares of Socket Series A
Preferred Stock; or (ii) any property or assets of Socket or any Socket
Subsidiary, except in the ordinary course of business and in a manner
consistent with past practice;
(c) declare, set aside, make or pay any dividend or other
distribution, payable in cash, stock, property or otherwise, with respect to
any of its capital stock;
<PAGE>
Combination Agreement By and Between
Socket Communications, Inc. and
Cetronic Aktiebolag [Publ]
Dated as of June 12, 1997
Page 18
(d) reclassify, combine, split, subdivide or redeem, purchase
or otherwise acquire, directly or indirectly, any of its capital stock;
(e) (i) acquire (including, without limitation, by merger,
consolidation, or acquisition of stock or assets) any interest in any
corporation, partnership, other business organization, person or any division
thereof or any assets, other than acquisitions of assets in the ordinary
course of business consistent with past practice and any other acquisitions
for consideration that are not, in the aggregate, in excess of $50,000; (ii)
incur any indebtedness for borrowed money or issue any debt securities or
assume, guarantee or endorse, or otherwise as an accommodation become
responsible for, the obligations of any person for borrowed money, except for
indebtedness for borrowed money incurred in the ordinary course of business
and consistent with past practice or incurred to refinance outstanding
indebtedness for borrowed money existing on the date of this Agreement or
other indebtedness for borrowed money with a maturity of not more than one
year in a principal amount not, in the aggregate, in excess of $50,000; (iii)
terminate, cancel or request any material change in, or agree to any material
change in any Socket Material Contract or enter into any contract or
agreement material to the business, results of operations or financial
condition of Socket, in either case other than in the ordinary course of
business, consistent with past practice; (iv) make or authorize any capital
expenditure, other than capital expenditures that are not, in the aggregate,
in excess of $50,000 for Socket; or (v) enter into or amend any contract,
agreement, commitment or arrangement that, if fully performed, would not be
permitted under this Section 4.01(e);
(f) increase the compensation payable or to become payable to
its officers or employees, except for increases in accordance with past
practices in salaries or wages of employees of Socket who are not officers of
Socket, or grant any rights to severance or termination pay to, or enter into
any employment or severance agreement with, any director, officer or other
employee of Socket, or establish, adopt, enter into or amend any collective
bargaining, bonus, profit sharing, thrift, compensation, stock option,
restricted stock, pension, retirement, deferred compensation, employment,
termination, severance or other plan, agreement, trust, fund, policy or
arrangement for the benefit of any director, officer or employee, except as
contemplated by this Agreement, to the extent required by applicable Law or
the terms of a collective bargaining agreement, or in connection with the
hiring and retaining of a new Chief Executive Officer (it being understood,
however, that any such employment agreement or other arrangement entered into
in connection with hiring and retaining of a new Chief Executive Officer
shall be on terms reasonably acceptable to Cetronic);
(g) take any action with respect to accounting policies or
procedures, other than actions in the ordinary course of business and
consistent with past practice;
(h) waive, release, assign, settle or compromise any material
claims or litigation;
(i) make any tax election or settle or compromise any material
federal, state, local or foreign income tax liability; or
(j) authorize or enter into any formal or informal agreement or
otherwise make any commitment to do any of the foregoing.
SECTION 4.02 CONDUCT OF BUSINESS BY CETRONIC PENDING THE CLOSING.
Cetronic agrees that, between the date of this Agreement and the Closing
Time, except as contemplated by any provision of this Agreement, unless
Socket shall otherwise agree in writing, which agreement shall not be
unreasonably withheld or delayed, (1) the business of Cetronic and the
Cetronic Subsidiaries shall be conducted only in, and the Cetronic and the
Cetronic Subsidiaries shall not take any action except in, the ordinary
course of business consistent with past
<PAGE>
Combination Agreement By and Between
Socket Communications, Inc. and
Cetronic Aktiebolag [Publ]
Dated as of June 12, 1997
Page 19
practice and (2) Cetronic shall use its reasonable best efforts to keep
available the services of such of the current officers, significant employees
and consultants of Cetronic and the Cetronic Subsidiaries and to preserve the
current relationships of Cetronic and the Cetronic Subsidiaries with such of
the customers, suppliers and other persons with which Cetronic or any
Cetronic Subsidiary has significant business relations as Cetronic deems
reasonably necessary in order to preserve substantially intact its business
organization. Except as contemplated by any provision of this Agreement,
Cetronic shall not (unless required by applicable Laws or stock exchange
regulations) cause or permit Cetronic or any Cetronic Subsidiary to, and
shall neither cause nor permit any of Cetronic's affiliates (over which it
exercises control), or any of their officers, directors, employees and agents
to, between the date of this Agreement and the Closing Time, directly or
indirectly, do, or agree to do, any of the following without the prior
written consent of Socket, which consent shall not be unreasonably withheld
or delayed:
(a) amend or otherwise change its Articles of Association or
equivalent organizational documents;
(b) issue, sell, pledge, dispose of, grant, transfer, lease,
license, guarantee, encumber, or authorize the issuance, sale, pledge,
disposition, grant, transfer, lease, license, guarantee or encumbrance of,
(i) any shares of capital stock of Cetronic or any Cetronic Subsidiary of any
class, or securities convertible or exchangeable or exercisable for any
shares of such capital stock, or any options, warrants or other rights of any
kind to acquire any shares of such capital stock, or any other ownership
interest (including, without limitation, any phantom interest), of Cetronic
or any Cetronic Subsidiary or (ii) any property or assets of Cetronic or any
Cetronic Subsidiary, except in the ordinary course of business and in a
manner consistent with past practice;
(c) recommend to its stockholders that the stockholders
declare, set aside, make or pay any dividend or other distribution, payable
in cash, stock, property or otherwise, with respect to any of its capital
stock;
(d) reclassify, combine, split, subdivide or redeem, purchase
or otherwise acquire, directly or indirectly, any of its capital stock;
(e) (i) acquire (including, without limitation, by merger,
consolidation, or acquisition of stock or assets) any interest in any
corporation, partnership, other business organization, person or any division
thereof or any assets, other than acquisitions of assets in the ordinary
course of business consistent with past practice and any other acquisitions
for consideration that are not, in the aggregate, in excess of $50,000; (ii)
incur any indebtedness for borrowed money or issue any debt securities or
assume, guarantee or endorse, or otherwise as an accommodation become
responsible for, the obligations of any person for borrowed money, except for
indebtedness for borrowed money incurred in the ordinary course of business
and consistent with past practice or incurred to refinance outstanding
indebtedness for borrowed money existing on the date of this Agreement or
other indebtedness for borrowed money with a maturity of not more than one
year in a principal amount not, in the aggregate, in excess of $50,000; (iii)
terminate, cancel or request any material change in, or agree to any material
change in any Cetronic Material Contract or enter into any contract or
agreement material to the business, results of operations or financial
condition of Cetronic and the Cetronic Subsidiaries taken as a whole, in
either case other than in the ordinary course of business, consistent with
past practice; (iv) make or authorize any capital expenditure, other than
capital expenditures that are not, in the aggregate, in excess of $50,000 for
Cetronic and the Cetronic Subsidiaries taken as a whole; or (v) enter into or
amend any contract, agreement, commitment or arrangement that, if fully
performed, would not be permitted under this Section 4.02(e);
<PAGE>
Combination Agreement By and Between
Socket Communications, Inc. and
Cetronic Aktiebolag [Publ]
Dated as of June 12, 1997
Page 20
(f) increase the compensation payable or to become payable to
its officers or employees, except for increases in accordance with past
practices in salaries or wages of employees of Cetronic or any Cetronic
Subsidiary who are not officers of Cetronic, or grant any rights to severance
or termination pay to, or enter into any employment or severance agreement
with, any director, officer or other employee of Cetronic or any Cetronic
Subsidiary, or establish, adopt, enter into or amend any collective
bargaining, bonus, profit sharing, thrift, compensation, stock option,
restricted stock, pension, retirement, deferred compensation, employment,
termination, severance or other plan, agreement, trust, fund, policy or
arrangement for the benefit of any director, officer or employee, except to
the extent required by applicable Law or the terms of a collective bargaining
agreement;
(g) take any action with respect to accounting policies or
procedures, other than actions in the ordinary course of business and
consistent with past practice;
(h) waive, release, assign, settle or compromise any material
claims or litigation;
(i) make any tax election or settle or compromise any material
federal, state, local or foreign income tax liability;
(j) take any action that would result in a reduction of
Cetronic's cash balances (accounted for using generally accepted accounting
principles) to an amount less than SEK 18,400,000 (if the Closing Date shall
occur on or prior to September 30, 1997) or SEK 14,700,000 (if the Closing
Date shall occur after September 30, 1997 but prior to November 1, 1997) (the
"Minimum Cash Balance Requirement"); or
(k) authorize or enter into any formal or informal agreement or
otherwise make any commitment to do any of the foregoing.
SECTION 4.03 COOPERATION. Cetronic and Socket shall coordinate and
cooperate in connection with (i) the preparation of the Registration
Statement and the Disclosure Documents, (ii) determining whether any action
by or in respect of, or filing with, any Governmental Entity is required, or
any actions, consents, approvals or waivers are required to be obtained from
parties to any Socket Material Contracts or Cetronic Material Contracts, in
connection with the consummation of the Transactions and (iii) seeking any
such actions, consents, approvals or waivers or making any such filings,
furnishing information required in connection therewith or with the
Registration Statement and the Disclosure Documents and timely seeking to
obtain any such actions, consents, approvals or waivers.
SECTION 4.04 NOTICES OF CERTAIN EVENTS. Each of Cetronic and Socket
shall give prompt notice to the other of (i) any event occurring subsequent
to the date of this Agreement that would reasonably be likely to render any
representation and warranty of Cetronic or Socket untrue or inaccurate in any
material respect, (ii) any notice or other communication from any person
alleging that the consent of such person is or may be required in connection
with the Transactions, (iii) any notice or other communication from any
Governmental Entity in connection with the Transactions, (iv) any actions,
suits, claims, investigations or proceedings commenced or, to the best of its
knowledge threatened in writing against, relating to or involving or
otherwise affecting Cetronic, Socket or their subsidiaries that relate to the
consummation of the Transactions, (v) the occurrence of a default or event
that, with notice or lapse of time or both, will become a default under any
Socket Material Contract or Cetronic Material Contract, and (vi) any change
that is reasonably likely to result in a Socket Material Adverse Effect or a
Cetronic Material Adverse Effect or is likely to delay or impede the ability
of either Socket or
<PAGE>
Combination Agreement By and Between
Socket Communications, Inc. and
Cetronic Aktiebolag [Publ]
Dated as of June 12, 1997
Page 21
Cetronic to consummate the transactions contemplated by this Agreement or to
fulfill its obligations set forth herein.
SECTION 4.05 CONTRACTUAL CONSENTS. Prior to or at the Closing Time,
each of Cetronic and Socket shall use its reasonable best efforts to prevent
the occurrence, as a result of the Transactions, of a change of control or
any event which constitutes a default (or an event which with notice or lapse
of time or both would become a default) under any material contract,
agreement, lease, license, permit, franchise or other instrument or
obligation to which it or any of its subsidiaries is a party.
ARTICLE V
ADDITIONAL AGREEMENTS
SECTION 5.01 REGISTRATION STATEMENT; DISCLOSURE DOCUMENTS.
(a) As promptly as practicable after the execution of this
Agreement, Cetronic and Socket shall jointly prepare and Socket shall file
with the SEC a single document that will constitute (i) the proxy statement
of Socket relating to the special meeting of Socket's stockholders (the
"Socket Stockholders' Meeting") to be held to consider (A) adoption of this
Agreement, (B) approval of a one-for-five reverse split of the outstanding
Socket Common Stock so that every five shares of Socket Common Stock shall
thereafter be consolidated into one Share of Common Stock as soon as
practicable following the Closing (the "Reverse Stock Split"), (C) approval
of an amendment to increase the authorized number of shares of Socket Common
Stock from 15,000,000 to 25,000,000 (based on shares as constituted prior to
the Reverse Stock Split) and (D) approval of the 1997 Stock Option Plan for
Non-U.S. Employees and the reservation of shares of Socket Common Stock for
issuance thereunder; (ii) the prospectus forming part of the registration
statement on Form S-4 of Socket (together with all amendments thereto, the
"Registration Statement"), in connection with the registration under the
Securities Act of the Socket Common Stock to be issued to the stockholders of
Cetronic pursuant to the Exchange Offer, (iii) the offer to purchase to be
used by Socket in connection with the Exchange Offer, and (iv) the proxy
statement of Cetronic relating to the special meeting of Cetronic's
stockholders (the "Cetronic Stockholders' Meeting") to be held to consider
the waiver or termination of the preemptive rights (the "Preemptive Rights
Waiver") of Cetronic stockholders in connection with the exchange of their
Cetronic Shares in the Exchange Offer (such document, together with any
amendments thereof or supplements thereto, the "Joint Proxy Statement").
Substantially contemporaneously with the filing of the Joint Proxy Statement
with the SEC, copies thereof shall be provided to the National Association of
Securities Dealers ("NASD") and the PSE. Cetronic and Socket each shall use
its reasonable best efforts to cause the Registration Statement to become
effective as promptly as practicable, and, prior to the effective date of the
Registration Statement (the "Registration Statement Effective Date"), Socket
shall take all or any action required under any applicable Laws in connection
with the issuance of Socket Common Stock pursuant to the Exchange Offer.
Cetronic or Socket, as the case may be, shall furnish all information
concerning Cetronic or Socket as the other party may reasonably request in
connection with such actions and the preparation of the Registration
Statement and Disclosure Documents. As promptly as practicable after the
Registration Statement Effective Date, the Joint Proxy Statement will be
mailed to the stockholders of Cetronic and Socket, and, in the case of
Cetronic, Swedish language translations or summaries thereof or a separate
Swedish language prospectus, as may be necessary or appropriate, will be
provided to its registered stockholders. The Joint Proxy Statement, the
Swedish language prospectus, Registration Statement and all other documents
filed with the SEC, FSA or other U.S. or Swedish Governmental Entity,
including any translations
<PAGE>
Combination Agreement By and Between
Socket Communications, Inc. and
Cetronic Aktiebolag [Publ]
Dated as of June 12, 1997
Page 22
or summaries thereof, are referred to herein as the "Disclosure Documents."
Cetronic and Socket shall cause the Disclosure Documents to comply as to form
and substance in all material respects with the applicable requirements of
(i) the Exchange Act, including, without limitation, Sections 14(a) and 14(d)
thereof and the respective regulations promulgated thereunder, (ii) the NASD,
the PSE and, with respect to the Swedish language prospectus, the FSA, (iii)
the Securities Act, (iv) the NBK Recommendations Concerning Public Offers for
the Acquisition of Shares (1988), with respect to the Swedish language
prospectus, and (v) the DGCL.
(b) (i) The Disclosure Documents shall include the unanimous
and unconditional recommendation of the Board of Directors of Socket to the
stockholders of Socket that they vote in favor of adoption of this Agreement
and approval of the Reverse Stock Split; provided, however, that the Board of
Directors of Socket may, at any time prior to the Closing, withdraw, modify
or change any such recommendation if the Board of Directors of Socket
determines in good faith that failure to so withdraw, modify or change its
recommendation would cause the Board of Directors of Socket to breach its
fiduciary duties to Socket's stockholders under applicable Laws after receipt
of advice to such effect from independent legal counsel (who may be Socket's
regularly engaged independent legal counsel).
(ii) The Disclosure Documents shall include the unanimous
and unconditional recommendation of the Board of Directors of Cetronic to the
stockholders of Cetronic that they approve the Preemptive Rights Waiver and
accept the Exchange Offer; provided, however, that the Board of Directors of
Cetronic may, at any time prior to the Closing, withdraw, modify or change
any such recommendations if the Board of Directors of Cetronic determines in
good faith that failure to so withdraw, modify or change its recommendation
would cause the Board of Directors of Cetronic to breach its fiduciary duties
to Cetronic or Cetronic's stockholders under Swedish Laws after receipt of
advice to such effect from independent legal counsel (who may be Cetronic's
regularly engaged independent legal counsel).
(c) No amendment or supplement to the Disclosure Documents or
the Registration Statement will be made without the approval of Cetronic and
Socket, which approval shall not be unreasonably withheld or delayed. Each
of Cetronic and Socket will advise the others promptly after it receives
notice thereof, of the time when the Registration Statement has become
effective or any supplement or amendment has been filed, of the issuance of
any stop order, of the suspension of the qualification of Socket Common Stock
issuable in connection with the Exchange Offer for offering or sale in any
jurisdiction, or of any request by the SEC, the NASD, the PSE or the FSA for
amendment of the Disclosure Documents or the Registration Statement or
comments thereon and responses thereto or requests by the SEC, the NASD, the
PSE or the FSA for additional information
(d) The information supplied by Cetronic for inclusion in the
Registration Statement and the Disclosure Documents shall not, at (i) the
time the Registration Statement is declared effective, (ii) the time the
Joint Proxy Statement (or any amendment thereof or supplement thereto) or
Swedish language prospectus is first mailed to the stockholders of Cetronic
and Socket, (iii) the time of the Socket Stockholders' Meeting and the
Cetronic Stockholders' Meeting and (iv) the Closing Date, contain any untrue
statement of a material fact or fail to state any material fact required to
be stated therein or necessary in order to make the statements therein not
misleading. If at any time prior to the Closing, any event or circumstance
relating to Cetronic or any Cetronic Subsidiary, or their respective officers
or directors, should be discovered by Cetronic that should be set forth in an
amendment or a supplement to the Registration Statement or Disclosure
Documents, Cetronic shall promptly inform Socket. All documents that
Cetronic is responsible for filing with any Governmental Entity in
<PAGE>
Combination Agreement By and Between
Socket Communications, Inc. and
Cetronic Aktiebolag [Publ]
Dated as of June 12, 1997
Page 23
connection with the Transactions will comply as to form and substance in all
material respects with the applicable requirements of the FSA, the DGCL, the
Securities Act, the Exchange Act and other applicable Laws.
(e) The information supplied by Socket for inclusion in the
Registration Statement and the Disclosure Documents shall not, at (i) the
time the Registration Statement is declared effective, (ii) the time the
Joint Proxy Statement (or any amendment thereof or supplement thereto) is
first mailed to the stockholders of Socket and Cetronic, (iii) the time of
the Socket Stockholders' Meeting, and (v) the Closing Date, contain any
untrue statement of a material fact or fail to state any material fact
required to be stated therein or necessary in order to make the statements
therein not misleading. If at any time prior to the Closing any event or
circumstance relating to Socket or any Socket Subsidiary, or their respective
officers or directors, should be discovered by Socket that should be set
forth in an amendment or a supplement to the Registration Statement or
Disclosure Documents, Socket shall promptly inform Cetronic. All documents
that Socket is responsible for filing with any Governmental Entity in
connection with the Transactions will comply as to form and substance in all
material respects with the applicable requirements of the FSA, DGCL, the
Securities Act, the Exchange Act and other applicable Laws.
SECTION 5.02 STOCKHOLDERS' MEETINGS. (a) Socket shall call and hold
the Socket Stockholders' Meeting as promptly as practicable after the
Registration Statement Effective Date for the purpose of voting upon the
adoption of this Agreement and the approval of the Reverse Stock Split, and
Cetronic and Socket will cooperate with each other to cause the Socket
Stockholders' Meeting to be held on or proximate to the Expiration Date of
the Exchange Offer. Socket shall use its reasonable best efforts (through
its agents or otherwise) to solicit from its stockholders proxies in favor of
the adoption of this Agreement and approval of the Reverse Stock Split, and
shall take all other action necessary or advisable to secure the affirmative
vote of its stockholders required by the DGCL to secure such adoption and
approval, except to the extent that the Board of Directors of Socket
determines in good faith that doing so would cause the Board of Directors of
Socket to breach its fiduciary duties to Socket's stockholders under
applicable Laws after receipt of advice to such effect from independent legal
counsel (who may be Socket's regularly engaged independent legal counsel).
(b) Cetronic shall call and hold the Cetronic Stockholders'
Meeting as promptly as practicable after the Registration Statement Effective
Date for the purpose of voting upon the approval of the Preemptive Rights
Waiver, and Cetronic and Socket will cooperate with each other to cause the
Cetronic Stockholders' Meeting to be held on or proximate to the Expiration
Date of the Exchange Offer. Cetronic shall use its reasonable best efforts
(through its agents or otherwise) to solicit from its stockholders proxies in
favor of the approval of the Preemptive Rights Waiver, and shall take all
other action necessary or advisable to secure the affirmative vote of its
stockholders required by the FSA to secure such approval, except to the
extent that the Board of Directors of Cetronic determines in good faith that
doing so would cause the Board of Directors of Cetronic to breach its
fiduciary duties to Cetronic's stockholders under applicable Laws after
receipt of advice to such effect from independent legal counsel (who may be
Cetronic's regularly engaged independent legal counsel).
SECTION 5.03 ACCESS TO INFORMATION; CONFIDENTIALITY. (a) Except as
required pursuant to any confidentiality agreement or similar agreement or
arrangement to which Cetronic or Socket or any of their respective
subsidiaries is a party or pursuant to applicable Law or the regulations or
requirements of any stock exchange or other regulatory organization with
whose rules the parties are required to comply, from the date of this
Agreement to the Closing Date, Cetronic and Socket shall (and shall cause
their respective subsidiaries to): (i) provide to the other (and its
officers, directors, employees, accountants, consultants, legal counsel,
agents and
<PAGE>
Combination Agreement By and Between
Socket Communications, Inc. and
Cetronic Aktiebolag [Publ]
Dated as of June 12, 1997
Page 24
other representatives, collectively, "Representatives") access at reasonable
times upon prior notice to the officers, employees, agents, properties,
offices and other facilities of the other and its subsidiaries and to the
books and records thereof and (ii) furnish promptly such information
concerning the business, properties, contracts, assets, liabilities,
personnel and other aspects of the other party and its subsidiaries as the
other party or its Representatives may reasonably request. No investigation
conducted pursuant to this Section 5.03 shall affect or be deemed to modify
any representation or warranty made in this Agreement.
(b) The parties shall comply with, and shall cause their
respective Representatives to comply with, all of their respective
obligations under any and all the Confidentiality Agreements between Cetronic
and Socket with respect to the information disclosed pursuant to this Section
5.03.
SECTION 5.04 NO SOLICITATION OF TRANSACTIONS. (a) From and after
the date of this Agreement until the earlier of the Closing Time or the
termination of this Agreement in accordance with its terms, each party to
this Agreement will not, directly or indirectly, and will instruct its
officers, directors, employees, subsidiaries, agents or advisors or other
representatives (including, without limitation, any investment banker,
attorney or accountant retained by it), not to, directly or indirectly,
solicit, initiate or take any action intended, designed or reasonably likely
to encourage (including by way of furnishing nonpublic information), or take
any other action intended, designed or reasonably likely to facilitate, any
inquiries or the making of any proposal or offer (including, without
limitation, any proposal or offer to its stockholders) that constitutes, or
may reasonably be expected to lead to, any Competing Transaction, or enter
into or maintain or continue discussions or negotiate with any person or
entity in furtherance of such inquiries or to obtain a Competing Transaction,
or agree to or endorse any Competing Transaction, or authorize or permit any
of the officers, directors or employees of such party or any of its
subsidiaries, or any investment banker, financial advisor, attorney,
accountant or other representative retained by such party or any of such
party's subsidiaries, to take any such action. Each party to this Agreement
shall notify the other parties promptly if any proposal or offer, or any
inquiry or contact with any person with respect thereto, regarding a
Competing Transaction is made. Each party to this Agreement immediately
shall cease and cause to be terminated all existing discussions or
negotiations with any parties conducted heretofore with respect to a
Competing Transaction and promptly request that all confidential information
furnished on behalf of such party be returned. Each party to this Agreement
agrees not to release any third party from, or waive any provision of, any
confidentiality or standstill agreement to which it is a party.
(b) Notwithstanding anything to the contrary in Section 5.04
the Board of Directors of each party to this Agreement may cause such party
to furnish information to, and may participate in discussions or negotiations
with, any person that, unsolicited by such party, has submitted a written
proposal to such Board of Directors relating to a Competing Transaction, in
each case to the extent that the Board of Directors of such party determines
in good faith that the failure to do so would cause the Board of Directors of
such party to breach its fiduciary duties to such party or its stockholders
under applicable Laws after receipt of advice to such effect from independent
legal counsel (who may be such party's regularly engaged independent legal
counsel) and, notwithstanding anything to the contrary contained in this
Agreement, any such furnishing of information and participation in
discussions or negotiations shall not constitute a breach of this Agreement
by such party; provided, however, that any party furnishing such information,
or participating in such discussions or negotiations shall notify the other
promptly of such action and shall, in any such notice, indicate the identity
of the person making the written proposal referred to in this Section 5.04,
and, in reasonable detail, the terms and conditions of such written proposal.
<PAGE>
Combination Agreement By and Between
Socket Communications, Inc. and
Cetronic Aktiebolag [Publ]
Dated as of June 12, 1997
Page 25
(c) A "Competing Transaction" means any of the following
involving Cetronic or Socket, as the case may be (other than the Transactions
contemplated by this Agreement): (i) a merger, consolidation, share exchange,
business combination or other similar transaction; (ii) any sale, lease,
exchange transfer or other disposition of 25% or more of the assets of such
party and its subsidiaries, taken as a whole or (iii) a tender offer or
exchange offer for, or any other acquisition of, 10% or more of the
outstanding voting securities of such party.
SECTION 5.05 EMPLOYEE BENEFITS MATTERS. Annex A hereto sets forth
certain agreements among the parties hereto with respect to employee benefits
matters and is incorporated herein by this reference
SECTION 5.06 LETTERS OF ACCOUNTANTS.
(a) Socket shall use its reasonable best efforts to cause to be
delivered to Cetronic "comfort" letters of Ernst & Young LLP, Socket's
independent public accountants, dated and delivered on the Registration
Statement Effective Date and as of the Closing Date, and addressed to
Cetronic, in form and substance reasonably satisfactory to Cetronic and
reasonably customary in scope and substance for letters delivered by
independent public accountants in connection with transactions such as those
contemplated by this Agreement.
(b) Cetronic shall use its reasonable best efforts to cause to
be delivered to Socket "comfort" letters of Ohrlings Coopers & Lybrand AB,
Cetronic's independent public accountants, dated and delivered the
Registration Statement Effective Date and as of the Closing Date, and
addressed to Socket, in form and substance reasonably satisfactory to Socket
and reasonably customary in scope and substance for letters delivered by
independent public accountants in connection with transactions such as those
contemplated by this Agreement.
SECTION 5.07 FURTHER ACTION; CONSENTS; FILINGS.
(a) Upon the terms and subject to the conditions hereof, each
of the parties hereto shall use its best efforts to (i) take, or cause to be
taken, all appropriate action, and do, or cause to be done, all things
necessary, proper or advisable under applicable Law or otherwise to
consummate and make effective the Transactions, (ii) obtain from Governmental
Entities any consents, licenses, permits, waivers, approvals, authorizations
or orders required to be obtained or made by Cetronic or Socket or any of
their subsidiaries in connection with the authorization, execution and
delivery of this Agreement and the consummation of the Transactions, (iii)
make all necessary filings, and thereafter make any other submissions either
required or deemed appropriate by each of the parties, with respect to this
Agreement and the Transactions required under (A) the rules and regulations
of the FSA, (B) the Securities Act, the Exchange Act and any other applicable
federal or Blue Sky Laws, (C) the HSR Act, and (D) any other applicable Law.
The parties hereto shall cooperate and consult with each other in connection
with the making of all such filings, including by providing copies of all
such documents to the nonfiling party and its advisors prior to filing, and
none of the parties will file any such document if any of the other parties
shall have reasonably objected to the filing of such document. No party to
this Agreement shall consent to any voluntary extension of any statutory
deadline or waiting period or to any voluntary delay of the consummation of
the Transactions at the behest of any Governmental Entity without the consent
and agreement of the other parties to this Agreement, which consent shall not
be unreasonably withheld or delayed.
<PAGE>
Combination Agreement By and Between
Socket Communications, Inc. and
Cetronic Aktiebolag [Publ]
Dated as of June 12, 1997
Page 26
(b) Without limiting the generality of Section 5.07(a), each of
Cetronic and Socket shall:
(i) take promptly any or all of the following actions to
the extent necessary to obtain the approval of any Governmental Entity with
jurisdiction over the enforcement of any applicable Laws regarding the
legality of the Transactions: entering into negotiations, providing
information, making proposals, entering into and performing agreements or
submitting to judicial or administrative orders, or selling or otherwise
disposing of, or holding separate (through the establishment of a trust or
otherwise) particular assets or categories of assets, or businesses, of
Cetronic, Socket or any of their affiliates; provided, however, neither
Cetronic nor Socket shall be obligated to take any action that would have a
Cetronic Material Adverse Effect or a Socket Material Adverse Effect, as the
case may be, assuming for purposes of this proviso that the Transactions have
been consummated;
(ii) use its best efforts to prevent the entry in a
judicial or administrative proceeding brought under any Law by any Government
Entity or any other party of any permanent or preliminary injunction or other
order (an "Order") that would make consummation of the Transactions in
accordance with the terms of this Agreement unlawful or that would prevent or
delay such consummation, including, without limitation, taking the steps
contemplated by Section 5.07(b)(i); and
(iii) take promptly, in the event that such an Order has
been issued in such a proceeding, any and all steps, including, without
limitation, the appeal thereof, the posting of a bond or the steps
contemplated by Section 5.07(b)(i), necessary to vacate, modify or suspend
such injunction or order so as to permit such consummation on a schedule as
close as possible to that contemplated by this Agreement.
SECTION 5.08 SOCKET ORGANIZATION. Immediately prior to the Closing
Time, Socket shall take action to cause the full Board of Directors of Socket
at the Closing to consist of (A) two persons who are currently directors of
Socket, (B) two persons who are currently directors of Cetronic, and (C) the
Chief Executive Officer of Socket; provided, however, that if Socket has not
hired a new Chief Executive Officer by the Closing Time, such Socket Board
position shall remain vacant until such time as Socket hires a new Chief
Executive Officer who is mutually agreeable to Socket and Cetronic.
SECTION 5.09 PUBLIC ANNOUNCEMENTS. Cetronic and Socket shall
consult with each other before issuing any press release or otherwise making
any public statements with respect to this Agreement or any Transaction and
shall not issue any such press release or make any such public statement
prior to such consultation, except to the extent required by applicable Law
or the requirements of the NASD or the Pacific Stock Exchange ("PSE"), in
which case the issuing party shall use its reasonable best efforts to consult
with the other party before issuing any such release or making any such
public statement.
SECTION 5.10 STOCK EXCHANGE LISTINGS. Socket shall use its best
efforts to cause the shares of Socket Common Stock to be issued in the
Transactions to be approved for listing on the OTC Bulletin Board or the
Nasdaq SmallCap Market, as applicable, and the PSE, subject to official
notice of issuance, prior to the Closing Date. Following the Closing Date,
Socket shall use its reasonable efforts to cause its Common Stock (or Swedish
securities (i.e., SDS's) based on the Socket Common Stock) to be approved for
listing on the SSE or similar Swedish exchange.
<PAGE>
Combination Agreement By and Between
Socket Communications, Inc. and
Cetronic Aktiebolag [Publ]
Dated as of June 12, 1997
Page 27
SECTION 5.11 CONVERTIBLE BRIDGE LOANS.
(a) Concurrently with the execution of this Agreement, (i)
Cetronic shall provide Socket with a six-month convertible bridge loan in the
principal amount of $500,000, which loan shall be evidenced by a promissory
note in the form attached hereto as EXHIBIT A (the "New Cetronic Note"); and
(ii) the individuals and entities set forth on Schedule 5.11 hereof shall
provide Socket with a six-month convertible bridge loan in the aggregate
principal amount of $100,000, which loan shall be evidenced by a promissory
note in the form attached hereto as Exhibit B.
(b) Prior to the earlier of their respective maturity dates or
the Closing Time, (i) with respect to a prior convertible bridge loan
provided by Cetronic to Socket in the principal amount of $500,000 (the
"Prior Cetronic Note"), Cetronic shall, and with respect to prior convertible
bridge loans provided by certain Cetronic stockholders, Cetronic shall use
its best efforts to extend the maturity date of such bridge loans outstanding
so that they become due on the same date as the six-month loan described in
paragraph (i) hereof; and (ii) Socket shall use its best efforts to obtain up
to an additional $400,000 in six-month convertible bridge loans on
substantially the same terms as the six month loans described in paragraph
(a)(ii) hereof.
SECTION 5.12 CETRONIC INTELLECTUAL PROPERTY AGREEMENTS. Prior to the
Closing Time, (a) the individuals and entities listed on Schedule 5.12(a)
will enter into agreements (the "IP Agreements") with Cetronic confirming
Cetronic's ownership of its intellectual property and confirming that such
individual or entity has no rights in any Cetronic intellectual property; (b)
the individuals and entities listed on Schedule 5.12(b) will enter into IP
Agreements with Cetronic Norge A/S, a Norwegian corporation and wholly owned
subsidiary of Cetronic ("Cetronic Norge"), confirming Cetronic Norge's
ownership or rights to use intellectual property and confirming that such
individual or entity have no rights in any Cetronic Norge intellectual
property; and (c) the individuals and entities listed on Schedule 5.12(c)
will enter into IP Agreements with Socket confirming Socket's ownership of
its intellectual property and confirming that such individual or entity has
no rights in any Socket intellectual property.
SECTION 5.13 TERMINATION OF CETRONIC STOCKHOLDERS' AGREEMENT. Prior
to the Closing Time, the agreement between Cetronic and the holders of
Cetronic Class A Shares, which provides for, among other things, a right of
first refusal with respect to the sale of such shares, shall be terminated in
accordance with its terms and shall be of no further force or effect.
SECTION 5.14 CETRONIC RELATED-PARTY AGREEMENTS. Prior to the
Closing Time, Cetronic shall cause the agreements listed in Section 3.14 of
the Cetronic Disclosure Schedule to be amended on terms mutually agreeable to
Socket and the parties thereto.
SECTION 5.15 CONVERSION OF CETRONIC CONVERTIBLE NOTES. Prior to the
initial Expiration Date of the Exchange Offer, Cetronic shall use its best
efforts to cause the holders of the convertible promissory notes of Cetronic
listed on Schedule 5.15 to convert all of the outstanding principal of such
notes and any accrued interest thereon into Cetronic Shares in accordance
with the terms thereof
SECTION 5.16 REGISTRATION RIGHTS AGREEMENT. Prior to the Closing
Time, Socket and the persons listed on Schedule 5.16 shall have entered into
a Registration Rights Agreement in a form to be mutually agreed upon by such
persons pursuant to which, among other things, Socket shall agree to file a
Registration Statement for the registration of the shares of Socket Common
Stock to be owned by the persons listed on Schedule 5.16
<PAGE>
Combination Agreement By and Between
Socket Communications, Inc. and
Cetronic Aktiebolag [Publ]
Dated as of June 12, 1997
Page 28
following the Closing Date within ninety (90) days of the Closing Date and
that Socket shall use its reasonable best efforts to cause such Registration
Statement to be declared effective as soon as practicable thereafter and to
remain effective for a period of two (2) years.
ARTICLE VI
CONDITIONS TO THE TRANSACTIONS
SECTION 6.01 CONDITIONS TO THE OBLIGATIONS OF EACH PARTY TO
CONSUMMATE THE TRANSACTIONS. The obligations of Cetronic and Socket to
consummate the Transactions, or to permit the consummation of the
Transactions, are subject to the satisfaction or, if permitted by applicable
Law, waiver of the following conditions:
(a) the Registration Statement shall have been declared
effective by the SEC under the Securities Act, and no stop order suspending
the effectiveness of the Registration Statement shall have been issued by the
SEC and no proceeding for that purpose shall have been initiated by the SEC;
(b) The Swedish language prospectus shall have been filed with
the FSA, and no action shall have been taken by the FSA that might influence
the Exchange Offer and no proceeding for that purpose shall have been
initiated by the FSA;
(c) This Agreement and the Transactions shall have been
approved and adopted by the requisite vote of the stockholders of Socket, and
the amendment to Cetronic's Articles of Association involving the termination
of all preemptive or similar rights of Cetronic stockholders shall have been
approved by the requisite vote of the stockholders of Cetronic.
(d) no court of competent jurisdiction shall have issued or
entered any Order which is then in effect and has the effect of making any of
the Transactions illegal or otherwise prohibiting their consummation;
(e) all consents, approvals and authorizations required to be
obtained to consummate the Transactions shall have been obtained from all
Governmental Entities, except where the failure to obtain any such consents,
approvals and authorizations would not result in a change in or effect on the
business of Socket or Cetronic that is, or is reasonably likely to be,
materially adverse to the business, assets (including intangible assets),
liabilities (contingent or otherwise), condition (financial or otherwise) or
results of operations of Socket, Cetronic and their respective subsidiaries,
taken as a whole;
(f) the shares of Socket Common Stock to be issued pursuant to
the Exchange Offer shall have been authorized for listing on the OTC Bulletin
Board or the Nasdaq Small Cap Market, as applicable, subject to official
notice of issuance, and shall have been authorized for listing on the PSE; and
(g) the Minimum Condition.
SECTION 6.02 CONDITIONS TO THE OBLIGATIONS OF SOCKET. The
obligations of Socket to consummate the Transactions, or to permit the
consummation of the Transactions, are subject to the satisfaction or, if
permitted by applicable Law, waiver of the following further conditions:
<PAGE>
Combination Agreement By and Between
Socket Communications, Inc. and
Cetronic Aktiebolag [Publ]
Dated as of June 12, 1997
Page 29
(a) each of the representations and warranties of Cetronic
contained in this Agreement shall be true and correct as of the Closing Date
as though made on and as of the Closing Date, except for changes contemplated
by this Agreement (including the Cetronic Disclosure Schedule) and except
that those representations and warranties that address matters only as of a
particular date which shall remain true and correct as of such date, with the
same force and effect as if made on and as of the Closing Date, except where
any such failure or failures to be so true and correct, in the aggregate,
would not have a Cetronic Material Adverse Effect, and Socket shall have
received a certificate of the Chairman, President or Chief Financial Officer
of Cetronic and the Cetronic Stockholder Agent to such effect;
(b) Cetronic shall have performed or complied in all material
respects with all agreements and covenants required by this Agreement to be
performed or complied with by it or them on or prior to the Closing Date, and
Socket shall have received a certificate of the Chairman, President or Chief
Financial Officer of Cetronic to that effect;
(c) Socket shall have been furnished with evidence satisfactory
to it that Cetronic has obtained the consents, approvals and waivers set
forth in Schedule 6.02(c);
(d) Socket shall have received a legal opinion from
Advokatfirman Fylgia, legal counsel to Cetronic, in a form that is customary
for similar transactions and is reasonably satisfactory to Socket; and
(e) Socket shall have been furnished with evidence satisfactory
to it that Cetronic has, as of the Closing Date, the Minimum Cash Balance
Requirement, and, other than as contemplated by this Agreement or as set
forth in Cetronic Disclosure Schedules, Cetronic has no agreement or
commitment that would reduce its cash balances below the Minimum Cash Balance
Requirement following the Closing Time, other than for agreements or
commitments consented to in writing by Socket prior to such agreement or
commitment, which consent shall not be unreasonably withheld.
SECTION 6.03 CONDITIONS TO THE OBLIGATIONS OF CETRONIC. The
obligations of Cetronic to consummate the Transactions, or to permit the
consummation of the Transactions, are subject to the satisfaction or, if
permitted by applicable Law, waiver of the following further conditions:
(a) Each of the representations and warranties of Socket
contained in this Agreement shall be true and correct as of the Closing Date,
as though made on and as of the Closing Date, except for changes contemplated
by this Agreement (including the Socket Disclosure Schedule) and except that
those representations and warranties that address matters only as of a
particular date (which shall remain true and correct as of such date) with
the same force and effect as if made on and as of the Closing Date, except
where any such failure or failures to be so true and correct, in the
aggregate, would not have a Socket Material Adverse Effect, and Cetronic
shall have received a certificate of the Chairman, President or Chief
Financial Officer of Socket to such effect;
(b) Socket shall have performed or complied in all material
respects with all agreements and covenants required by this Agreement to be
performed or complied with by it on or prior to the Closing Date, and
Cetronic shall have received a certificate of the Chairman, President or
Chief Financial Officer of Socket to that effect;
<PAGE>
Combination Agreement By and Between
Socket Communications, Inc. and
Cetronic Aktiebolag [Publ]
Dated as of June 12, 1997
Page 30
(c) Cetronic shall have been furnished with evidence
satisfactory to it that Socket has obtained the consents, approvals and
waivers set forth in Schedule 6.03(c);
(d) Cetronic shall have received a legal opinion from Wilson
Sonsini Goodrich & Rosati, legal counsel to Socket, in a form that is
customary for similar transactions and is reasonably satisfactory to Cetronic;
(e) Two members of the Board of Directors of Socket shall have
resigned, and the Board of Directors of Socket shall have taken appropriate
action to elect two Cetronic designees to fill the vacancies resulting from
such resignations to the Board of Directors of Socket, effective upon the
Closing; and
(f) To the extent required under the agreements listed on
Schedule 6.3(f), Socket shall have received the written consent, waiver or
authorization of the parties to the agreements listed on Schedule 6.3(fl.
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
SECTION 7.01 TERMINATION. This Agreement may be terminated and the
Exchange Offer may be abandoned at any time prior to the Closing, whether
before or after approval and adoption of this Agreement by the Socket
stockholders or the approval of the Preemptive Rights Waiver by the Cetronic
stockholders, as follows:
(a) by mutual written consent duly authorized by the Board of
Directors of each of Cetronic and Socket;
(b) by either Cetronic or Socket, if the Closing shall not have
occurred on or before November 1, 1997 (the "Final Closing Date"); provided,
however, that the right to terminate this Agreement under this Section
7.01(b) shall not be available to the party whose willful failure to fulfill
any obligation under this Agreement shall have been the cause of, or resulted
in, the failure of the Closing to occur on or before such date;
(c) by either Cetronic or Socket, if any Order preventing the
consummation of the Transactions shall have been entered by any court of
competent jurisdiction and shall have become final and nonappealable;
(d) by Cetronic, if (i) the Board of Directors of Socket
withdraws, modifies or changes its recommendation of this Agreement in a
manner adverse to Cetronic or shall have resolved to do so, (ii) the Board of
Directors of Socket shall have recommended to the stockholders of Socket a
Competing Transaction or shall have resolved to do so, or (iii) a tender
offer or exchange offer for 10% or more of the outstanding shares of capital
stock of Socket is commenced, and the Board of Directors of Socket fails to
recommend against acceptance of such tender offer or exchange offer by its
stockholders (including by taking no position with respect to the acceptance
of such tender offer or exchange offer by its stockholders);
(e) by Socket, if (i) the Board of Directors of Cetronic
withdraws, modifies or changes its recommendation of the Exchange Offer in a
manner adverse to Socket or shall have resolved to do so, (ii) the
<PAGE>
Combination Agreement By and Between
Socket Communications, Inc. and
Cetronic Aktiebolag [Publ]
Dated as of June 12, 1997
Page 31
Board of Directors of Cetronic shall have recommended to the stockholders of
Cetronic a Competing Transaction or shall have resolved to do so, or (iii) a
tender offer or exchange offer for 10% or more of the outstanding shares of
capital stock of Cetronic is commenced (other than the Exchange Offer), and
the Board of Directors of Cetronic fails to recommend against acceptance of
such tender offer or exchange offer by its stockholders (including by taking
no position with respect to the acceptance of such tender offer or exchange
offer by its stockholders);
(f) by Cetronic or Socket if, (i) this Agreement shall fail to
receive the requisite vote for adoption at the Socket Stockholders' Meeting
or any adjournment or postponement thereof, (ii) the Exchange Offer expires
without the Minimum Condition having been met or any Cetronic Shares having
been accepted for payment or (iii) the Preemptive Rights Waiver shall fail to
receive the requisite vote for approval at the Cetronic Stockholders' Meeting
or any postponement or adjournment thereof;
(g) by Cetronic, upon a breach of any material representation,
warranty, covenant or agreement on the part of Socket set forth in this
Agreement, or if any representation or warranty of Socket shall have become
untrue, in either case such that the conditions set forth in Section 6.03
would not be satisfied ("Terminating Socket Breach"); provided, however,
that, if such Terminating Socket Breach is curable by Socket through the
exercise of its best efforts and for so long as Socket continues to exercise
such best efforts, Cetronic may not terminate this Agreement under this
Section 7.01(g);
(h) by Socket, upon breach of any material representation,
warranty, covenant or agreement on the part of Cetronic set forth in this
Agreement, or if any representation or warranty of Cetronic shall have become
untrue, in either case such that the conditions set forth in Section 6.02
would not be satisfied ("Terminating Cetronic Breach"); provided, however,
that, if such Terminating Cetronic Breach is curable by Cetronic through best
efforts and for so long as Cetronic continues to exercise such best efforts,
Socket may not terminate this Agreement under this Section 7.01(h);
(i) by Cetronic, if the Board of Directors of Cetronic
shall, following receipt of advice of independent legal counsel (who may be
Cetronic's regularly engaged independent legal counsel) that failure to so
terminate would cause the Board of Directors of Cetronic to breach its
fiduciary duties under applicable Laws, have withdrawn, modified or changed
its recommendation of the approval of the Exchange Offer in a manner adverse
to Socket and, on or prior to such date, any person (other than Socket) shall
have made a public announcement or otherwise communicated to Cetronic and its
stockholders with respect to a Competing Transaction; provided, however, that
Cetronic may not terminate this Agreement pursuant to this subsection (i)
until three business days have elapsed following delivery to Socket of
written notice of such determination of Cetronic (which written notice will
inform Socket of material terms and conditions of the Competing Transaction);
provided, further, however, that such termination under this Section 7.01(i)
shall not be effective until Cetronic has converted the New Cetronic Note and
the Prior Cetronic Note to Socket as required pursuant to Section 7.05(c); or
(j) by Socket, if the Board of Directors of Socket shall,
following receipt of advice of independent legal counsel (who may be Socket's
regularly engaged independent legal counsel) that failure to so terminate
would cause the Board of Directors of Socket to breach its fiduciary duties
under applicable Laws, have withdrawn, modified or changed its recommendation
of the adoption of this Agreement in a manner adverse to Cetronic and, on or
prior to such date, any person (other than Cetronic) shall have made a public
announcement or otherwise communicated to Socket and its stockholders with
respect to a Competing Transaction; provided,
<PAGE>
Combination Agreement By and Between
Socket Communications, Inc. and
Cetronic Aktiebolag [Publ]
Dated as of June 12, 1997
Page 32
however, that Socket may not terminate this Agreement pursuant to this
subsection (j) until three business days have elapsed following delivery to
Cetronic of written notice of such determination of Socket (which written
notice will inform Cetronic of the material terms and conditions of the
Competing Transaction); provided, further, however, that such termination
under this Section 7.01(j) shall not be effective until Socket has delivered
to Cetronic the shares required to be delivered pursuant to Section 7.05(b).
SECTION 7.02 EFFECT OF TERMINATION. In the event of termination of
this Agreement pursuant to Section 7.01, this Agreement shall forthwith
become void, there shall be no liability under this Agreement on the part of
Cetronic, or Socket or any of their respective officers or directors, and all
rights and obligations of each party hereto shall cease, subject to the
remedies of the parties set forth in Sections 7.05(b), (c), (d) and (e);
provided, however, that nothing herein shall relieve any party from liability
for the wilful breach of any of its representations and warranties or the
breach of any of its covenants or agreements set forth in this Agreement.
SECTION 7.03 AMENDMENT. This Agreement may be amended by the
parties hereto by action taken by or on behalf of their respective Boards of
Directors at any time prior to the Closing Time. This Agreement may not be
amended except by an instrument in writing signed by the parties hereto.
SECTION 7.04 WAIVER. At any time prior to the Closing Time, any
party hereto may (a) extend the time for the performance of any obligation or
other act of any other party hereto, (b) waive any inaccuracy in the
representations and warranties contained herein or in any document delivered
pursuant hereto, and (c) waive compliance with any agreement or condition
contained herein. Any waiver of a condition set forth in Section 6.01, or
any determination that such a condition has been satisfied, will be effective
only if made in writing by each of Socket and Cetronic and, unless otherwise
specified in such writing, shall thereafter operate as a waiver (or
satisfaction) of such condition for any and all purposes of this Agreement.
Any such extension or waiver shall be valid if set forth in an instrument in
writing signed by the party or parties to be bound thereby.
SECTION 7.05 FEES AND EXPENSES.
(a) Except as set forth in this Section 7.05, all Expenses (as
defined below) incurred in connection with this Agreement and the
Transactions shall be paid by the party incurring such expenses, whether or
not the Exchange Offer is consummated, except that Cetronic and Socket each
shall pay one-half of all Expenses relating to printing, filing and mailing
the Registration Statement and the Disclosure Documents and all SEC and other
regulatory filing fees incurred in connection with the Registration Statement
and the Disclosure Documents. "Expenses" as used in this Agreement shall
consist of all out-of-pocket expenses (including, without limitation, all
fees and expenses of counsel, accountants, investment bankers, experts and
consultants to a party hereto and its affiliates) incurred by a party or on
its behalf in connection with or related to the authorization, preparation,
negotiation, execution and performance of this Agreement, the preparation,
printing, filing and mailing of the Registration Statement and the Disclosure
Documents, the solicitation of stockholder approvals and all other matters
related to the closing of the Transactions.
(b) Socket agrees that, if (A) Socket shall terminate this
Agreement pursuant to Section 7.01(j); (B) Cetronic shall terminate this
Agreement pursuant to Section 7.01(d) and at the time of such termination,
any person shall have made a public announcement or otherwise communicated
<PAGE>
Combination Agreement By and Between
Socket Communications, Inc. and
Cetronic Aktiebolag [Publ]
Dated as of June 12, 1997
Page 33
to Socket and its stockholders with respect to a Competing Transaction with
respect to Socket; or (C) (i) Cetronic shall terminate this Agreement
pursuant to Section 7.01(f)(i) due to the failure of the Socket Stockholder
Approval Condition, (ii) at the time of such failure, any person shall have
made a public announcement or otherwise communicated to Socket and its
stockholders with respect to a Competing Transaction with respect to Socket
and (iii) within six months thereafter, such Competing Transaction shall be
consummated, in each case resulting in a Change of Control (as defined below)
of Socket, then promptly after such termination, or (in the case of clause
(C)) promptly after the consummation of such Competing Transaction, Socket
shall issue to Cetronic 500,000 shares of Socket Common Stock. For purposes
of this Agreement, the term "Change of Control," with respect to any
particular person, shall mean the occurrence of any of the following events
with respect to such person: (i) there shall be consummated (A) any merger,
consolidation or combination (any, a "Combination") involving such person in
which such person is not the continuing or surviving corporation, or pursuant
to which shares of such person's voting stock would be converted in whole or
in part into cash, other securities or other property, other than a
Combination involving such person in which the holders of such person's
voting stock immediately prior to the Combination have substantially the same
proportionate ownership of voting stock of the surviving corporation
immediately after the Combination, or (B) any sale, lease, exchange or
transfer (in one transaction or a series of related transactions) of all or
substantially all of the assets of such person, or (ii)any person, other than
such person or a subsidiary thereof or any employee benefit plan sponsored by
such person or a subsidiary thereof or a corporation owned, directly or
indirectly, by the stockholders of such person in substantially the same
proportions in their ownership of stock of such person, shall become the
beneficial owner (within the meaning of Rule 13d-3 under the Exchange Act) of
securities of such person representing 50% or more of the combined voting
power of then outstanding securities ordinarily (and apart from rights
accruing in special circumstances) having the right to vote in the election
of directors, as a result of a tender or exchange offer, open market
purchases, privately negotiated purchases or otherwise.
(c) Cetronic agrees that, if (A) Cetronic shall terminate this
Agreement pursuant to Section 7.01(i); (B) Socket shall terminate this
Agreement pursuant to Section 7.01(e) and at the time of such termination,
any person shall have made a public announcement or otherwise communicated to
Cetronic and its stockholders with respect to a Competing Transaction with
respect to Cetronic; or (C) (i) Socket shall terminate this Agreement
pursuant to Section 7.01(f)(ii) or 7.01(f)(iii) due to the fact that the
Exchange Offer has expired without any Cetronic Shares having been accepted
for payment or the failure of the Preemptive Rights Waiver to receive the
requisite approval at the Cetronic Stockholders' Meeting, (ii) at the time of
such failure, any person shall have made a public announcement or otherwise
communicated to Cetronic and its stockholders with respect to a Competing
Transaction with respect to Cetronic and (iii) within six months thereafter,
such Competing Transaction shall be consummated, in each case resulting in a
Change of Control of Cetronic, then promptly after such termination, or (in
the case of clause (C)) promptly after the consummation of such Competing
Transaction, Cetronic shall convert into shares of Socket Common Stock the
New Cetronic Note and the Prior Cetronic Note, as amended, referred to in
Section 5.11 hereof, plus accrued interest thereon in accordance with the
terms thereof.
(d) (i) Socket agrees that if this Agreement is terminated by
either party pursuant to Section 7.01 (f)(i) as a result of the failure to
obtain the requisite vote for adoption of this Agreement at the Socket
Stockholders' Meeting or any adjournment or postponement thereof, then Socket
shall reimburse Cetronic for all its Expenses (upon receipt of reasonable
documentation in respect thereof) up to an aggregate amount of $350,000; and
(ii) Cetronic agrees that if this Agreement is terminated by either party
pursuant to Section 7.01 (f)(ii) or (iii) as a result of the Exchange Offer
expiring without any Cetronic Shares having been accepted for payment or the
failure of the Preemptive Rights Waiver to receive the requisite vote for
approval at the Cetronic Stockholders' Meeting or any postponement or
adjournment thereof, then Cetronic shall reimburse Socket for all of its
Expenses (upon receipt of reasonable documentation in respect thereof) up to
an aggregate amount of $350,000.
<PAGE>
Combination Agreement By and Between
Socket Communications, Inc. and
Cetronic Aktiebolag [Publ]
Dated as of June 12, 1997
Page 34
(e) Each of Cetronic and Socket agrees that the provisions of
Sections 7.05(b), (c) and (d) shall be the sole and exclusive remedies of the
parties upon a termination of this Agreement pursuant to Section 7.01(d),
(e), (f), (i) or (j), as the case may be, and such remedies shall be limited
to the provisions stipulated in Sections 7.05(b), (c) and (d); provided,
however, that nothing herein shall relieve any party from liability for the
wilful breach of any of its representations and warranties or the breach of
any of its covenants or agreements set forth in this Agreement.
(f) Any note conversion or share issuance required to be made
pursuant to Section 7.05(b) or (c) shall be taken by the party required to
take such action as soon as practicable after delivery to the other party of
notice of demand for such note conversion or share issuance. Any payment
required to be made pursuant to Section 7.05(d) shall be made to the party
entitled to receive such payment not later than five business days after
delivery to the other party of notice of demand for payment and shall be made
by wire transfer of immediately available funds to an account designated by
the party entitled to receive payment in the notice of demand for payment
delivered pursuant to this Section 7.05(f).
(g) In the event that Cetronic or Socket, as the case may be,
shall fail to pay any Expenses when due, the amount of any such Expenses
shall be increased to include the costs and expenses actually incurred or
accrued by the other (including, without limitation, fees and expenses of
counsel) in connection with the collection under and enforcement of this
Section 7.05, together with interest on such unpaid Expenses, commencing on
the date that such Expenses became due, at a rate equal to the rate of
interest publicly announced by Citibank, N.A., from time to time, in The City
of New York, as such bank's Prime Rate plus 1.00%.
ARTICLE VIII
GENERAL PROVISIONS
SECTION 8.01 NO SURVIVAL OF REPRESENTATIONS. All representations,
warranties and covenants of the parties contained in this Agreement will
remain operative and in full force and effect, regardless of any
investigation made by or on behalf of the parties to this Agreement, until
the earlier of the termination of this Agreement or the Closing Date,
whereupon such representations, warranties and covenants will expire (except
for covenants that by their terms survive for a longer period).
SECTION 8.02 NOTICES. All notices, requests, claims, demands and
other communications hereunder shall be in writing and shall be given (and
shall be deemed to have been duly given upon receipt) by delivery in person,
by telecopy and facsimile or by registered or certified mail (postage
prepaid, return receipt requested) to the respective parties at the following
addresses (or at such other address for a party as shall be specified in a
notice given in accordance with this Section 9.02):
if to Cetronic: Cetronic Aktiebolag
Box 153
S-864 22 MATFORS
SWEDEN
Attention: Kurt Sjoblom
Telecopier: 46 60 67 13 09
<PAGE>
Combination Agreement By and Between
Socket Communications, Inc. and
Cetronic Aktiebolag [Publ]
Dated as of June 12, 1997
Page 35
with a copy to: Tomlinson Zisko Morosoli & Maser LLP
200 Page Mill Road, Second Floor
Palo Alto, CA 94306
Attention: Richard Allan Horning
Telecopier: (415) 324-1808
and a copy to: Advokatfirman Fylgia
P.O. Box 55555
Linnegatan 2 S-102
04 Stockholm
SWEDEN
Attention: Jan Ramkvist, Esq.
Telecopier: +46-8442 53 15
if to Socket: Socket Communications, Inc.
37400 Central Court
Newark, CA 94560
Attention: Chief Financial Officer
Telecopier: (510) 744-2728
with copies to: Wilson Sonsini Goodrich & Rosati
650 Page Mill Road
Palo Alto, California 94304
Attention: Barry E. Taylor, Esq.
Telecopier: (415) 493-6811
and a copy to: Lagerlof & Leman Advokatbyra
P.O. Box 5402 S-114
84 Stockholm
SWEDEN
Attention: Peter Traung, Esq.
Telecopier: +46-8 667 68 83
SECTION 8.03 CERTAIN DEFINITIONS. For purposes of this Agreement,
the term:
(a) "affiliate" of a specified person means a person who
directly or indirectly through one or more intermediaries controls, is
controlled by, or is under common control with, such specified person;
(b) "beneficial owner" with respect to any shares of capital
stock means a person who shall be deemed to be the beneficial owner of such
shares (i) which such person or any of its affiliates or associates (as such
term is defined in Rule 12b-2 promulgated under the Exchange Act)
beneficially owns, directly or indirectly, (ii) which such person or any of
its affiliates or associates has, directly or indirectly, (A) the right to
acquire (whether such right is exercisable immediately or subject only to the
passage of time), pursuant to any agreement, arrangement or understanding or
upon the exercise of consideration rights, exchange rights, warrants or
options, or otherwise, or (B) the right to vote pursuant to any agreement,
arrangement or understanding, or
<PAGE>
Combination Agreement By and Between
Socket Communications, Inc. and
Cetronic Aktiebolag [Publ]
Dated as of June 12, 1997
Page 36
(iii) which are beneficially owned, directly or indirectly, by any other
persons with whom such person or any of its affiliates or associates or
person with whom such person or any of its affiliates or associates has any
agreement, arrangement or understanding for the purpose of acquiring,
holding, voting or disposing of any shares of capital stock;
(c) "business day" means any day on which the principal offices
of the SEC in Washington, D.C. are open to accept filings, or, in the case of
determining a date when any payment is due, any day on which banks are
generally open for commercial transactions in The City of New York, USA or in
Stockholm, Sweden;
(d) "control" (including the terms "controlled by" and "under
common control with") means the possession, directly or indirectly or as
trustee or executor, of the power to direct or cause the direction of the
management and policies of a person, whether through the ownership of voting
securities, as trustee or executor, by contract or credit arrangement or
otherwise:
(e) "knowledge" means, with respect to any matter in question,
that the executive officers of Cetronic or Socket, as the case may be, (i)
have knowledge of such matter, or (ii) after due investigation, should have
known of such matter;
(f) "Noon Buying Rate" means the noon buying rate in The City
of New York for cable transfers in Swedish kronor as certified for customs
purposes by the Federal Reserve Bank of New York;
(g) "person" means an individual, corporation, company, limited
liability company, partnership, limited partnership, syndicate, person
(including, without limitation, a "person" as defined in Section 13(d)(3) of
the Exchange Act), trust, association or entity or government, political
subdivision, agency or instrumentality of a government; and
(h) "subsidiary" or "subsidiaries" of any person means any
corporation, limited liability company, partnership, joint venture or other
legal entity of which such person (either alone or through or together with
any other subsidiary) owns, directly or indirectly, more than 50% of the
stock or other equity interests, the holders of which are generally entitled
to vote for the election of the board of directors or other governing body of
such corporation or other legal entity.
SECTION 8.04 SEVERABILITY. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of
Law or public policy, all other conditions and provisions of this Agreement
shall nevertheless remain in full force and effect so long as the economic or
legal substance of the Transactions is not affected in any manner materially
adverse to any party. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the parties
hereto shall negotiate in good faith to modify this Agreement so as to effect
the original intent of the parties as closely as possible in a mutually
acceptable manner in order that the Transactions be consummated as originally
contemplated to the fullest extent possible.
SECTION 8.05 ASSIGNMENT; BINDING EFFECT; BENEFIT. Neither this
Agreement nor any of the rights, interests or obligations hereunder shall be
assigned by any of the parties hereto (whether by operation of Law or
otherwise) without the prior written consent of the other parties. Subject
to the preceding sentence, this Agreement shall be binding upon and shall
inure to the benefit of the parties hereto and their respective successors
and assigns. Notwithstanding anything contained in this Agreement to the
contrary, nothing in this Agreement,
<PAGE>
Combination Agreement By and Between
Socket Communications, Inc. and
Cetronic Aktiebolag [Publ]
Dated as of June 12, 1997
Page 37
expressed or implied, is intended to confer on any person other than the
parties hereto or their respective successors and assigns any rights,
remedies, obligations or liabilities under or by reason of this Agreement.
SECTION 8.06 INCORPORATION OF EXHIBITS. The Cetronic Disclosure
Schedule, the Socket Disclosure Schedule, Annex A and all Exhibits attached
hereto and referred to herein are hereby incorporated herein and made a part
of this Agreement for all purposes as if fully set forth herein.
SECTION 8.07 GOVERNING LAW. This Agreement shall be governed by,
and construed in accordance with, the laws of the State of California without
regard to the conflicts of law provisions of the State of California or of
any other state or country except that the fiduciary duties of the directors
of Socket and Cetronic shall be governed under the laws of the jurisdiction
of their respective organizations.
SECTION 8.08 ARBITRATION. Except as otherwise provided herein, all
disputes, controversies, demands, or claims arising out of or relating to
this Agreement, to the transactions contemplated by this Agreement, or to the
formation, interpretation, performance, breach or termination thereof, which
cannot be settled by direct negotiation between the parties, shall be finally
settled and determined by arbitration administered by the International
Chamber of Commerce (the "ICC") under its then current Rules of Conciliation
and Arbitration (the "ICC Rules"). The written award of the arbitrators shall
be final and binding upon the parties, and judgment on or enforcement of the
award so rendered may be sought, had or entered in any court having
jurisdiction.
(a) INITIATION OF ARBITRATION. Any party may initiate
arbitration by filing a written request for arbitration with the Secretariat
of the ICC. A copy of the request shall be furnished to all other parties in
accordance with the provisions of the ICC Rules and Section 8.02 Notices.
(b) APPOINTMENT OF ARBITRATORS. Each party shall appoint an
arbitrator, and after consultation with the parties the ICC shall appoint a
third arbitrator. Each arbitrator so appointed shall have an international
reputation as being experienced in the legal and technical matters related to
the dispute.
(c) LOCATION OF THE ARBITRATION. The seat of arbitration shall
be Stockholm, Sweden, if the request for arbitration is first made by Socket,
or Palo Alto, California, if the request for arbitration is first made by
Cetronic. The arbitrators may hold hearings at such other locations as the
arbitrators shall determine, after consultation with the parties.
(d) LANGUAGE OF ARBITRATION. The arbitral proceedings and all
pleadings and written evidence shall be in the English language. Any written
evidence originally in a language other than English shall be submitted in
English translation accompanied by the original or true copy thereof.
(e) TERMS OF REFERENCE. In addition to those matters required
by the ICC Rules to be included in the Terms of Reference, the arbitrators
shall, after consultation with the parties, include within the Terms of
Reference appropriate provisions which:
(i) require the disclosure of all exhibits expected to
be used by the parties at the arbitration, and the exchange of complete
copies of all such exhibits in advance of the arbitration;
(ii) determine the dates for the exchange of said written
disclosures and copies of said exhibits;
<PAGE>
Combination Agreement By and Between
Socket Communications, Inc. and
Cetronic Aktiebolag [Publ]
Dated as of June 12, 1997
Page 38
(iii) require the written disclosure of the identity of
all witnesses whom the parties expect to call at the arbitration;
(iv) determine the dates for the exchange of the written
disclosures of the identity of witnesses which the parties expect to call at
the arbitration;
(v) determine the dates for the exchange of sworn
narrative statements containing the testimony of all witnesses whom the
parties expect to call at the arbitration;
(vi) require that the sworn narrative testimony of
witnesses be submitted in substitution for the direct examination of the
witness, and that all witnesses whose sworn testimony is submitted for
consideration by the arbitrators must present him or herself for cross
examination at the time and place of the arbitration hearing, unless some
other procedure providing the parties with a full and complete opportunity
for cross-examination has been established and provided by the arbitrators,
the parties and the witness:
(vii) prohibit, except upon a showing of good cause, or
for purposes of rebuttal, the receipt into evidence of any exhibit not
disclosed by the parties, nor shall the arbitrators permit a party to present
the testimony of any witness whose identity and testimony was not exchanged
prior to the arbitration; and
(viii) permit discovery as reasonable and necessary for the
orderly preparation of the dispute for hearing and determination of the
dispute (said discovery may include requests for production of documents and
depositions of witnesses who cannot be summoned to the arbitration or are
otherwise unavailable to attend the arbitration).
(f) LIMITATION ON REMEDIES. The arbitrators are precluded from
awarding punitive or exemplary damages, and may not award any indirect,
special, incidental or consequential damages except upon a showing of bad
faith. In no event shall the arbitrators have the powers of an amiable
compositeur.
(g) RESORT TO THE COURTS. Nothing in this Agreement prohibits
any party from seeking interim or conservatory relief in any court of
competent jurisdiction; PROVIDED, HOWEVER that neither the filing of an
application for a temporary restraining order, preliminary injunction, or
other interim or conservatory relief, as necessary, nor the granting of such
relief, shall be deemed to be a waiver of the obligation of the party to have
the dispute heard and determined solely and exclusively by arbitration.
(h) SURVIVAL. The rights and obligations of the parties as
described herein shall survive the termination, expiration, non-renewal, or
rescission of the Agreement between the parties.
SECTION 8.09 HEADINGS. The descriptive headings contained in this
Agreement are included for convenience of reference only and shall not affect
in any way the meaning or interpretation of this Agreement.
SECTION 8.10 COUNTERPARTS. This Agreement may be executed and
delivered (including by facsimile transmission) in one or more counterparts,
and by the different parties hereto in separate counterparts, each of which
when executed and delivered shall be deemed to be an original but all of
which taken together shall constitute one and the same agreement.
<PAGE>
Combination Agreement By and Between
Socket Communications, Inc. and
Cetronic Aktiebolag [Publ]
Dated as of June 12, 1997
Page 39
SECTION 8.11 ENTIRE AGREEMENT. This Agreement (including Annex A,
the Exhibits, the Cetronic Disclosure Schedule, the Socket Disclosure
Schedule and the Schedules hereto) and any Confidentiality Agreement between
Socket and Cetronic constitute the entire agreement among the parties with
respect to the subject matter hereof and supersede all prior agreements and
understandings among the parties with respect thereto. No addition to or
modification of any provision of this Agreement shall be binding upon any
party hereto unless made in writing and signed by all parties hereto.
<PAGE>
Combination Agreement By and Between
Socket Communications, Inc. and
Cetronic Aktiebolag [Publ]
Dated as of June 12, 1997
Page 40
IN WITNESS WHEREOF, Socket and Cetronic have caused this Agreement to
be executed as of the date first written above by their respective officers
thereunto duly authorized.
"SOCKET"
SOCKET COMMUNICATIONS. INC.
By: /s/ Charlie Bass
-----------------------------------
Name: Charlie Bass
Title: Chairman of the Board and
Acting Chief Executive Officer
Attest by: /s/ David W. Dunlap
--------------------------
Name: David W. Dunlap
Title: Chief Financial Officer
and Corporate Secretary
"CETRONIC"
CETRONIC AKTIEBOLAG [PUBL]
By: /s/ Kurt Sjoblom
-----------------------------------
Name: Kurt Sjoblom
Title:
Attest by: /s/ Gunnar Dahl
--------------------------
Name: Gunnar Dahl
Title: Operation Manager
<PAGE>
EXHIBIT C
THE SECURITIES REPRESENTED BY THIS INSTRUMENT HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR QUALIFIED UNDER APPLICABLE STATE
SECURITIES LAWS AND HAVE BEEN TAKEN FOR INVESTMENT PURPOSES ONLY AND NOT WITH A
VIEW TO OR FOR SALE IN CONNECTION WITH ANY DISTRIBUTION THEREOF. THE SECURITIES
MAY NOT BE SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION AND
QUALIFICATION WITHOUT, EXCEPT UNDER CERTAIN SPECIFIC LIMITED CIRCUMSTANCES, AN
OPINION OF COUNSEL FOR THE HOLDER, CONCURRED IN BY COUNSEL FOR THE COMPANY, THAT
SUCH REGISTRATION AND QUALIFICATION ARE NOT REQUIRED.
SOCKET COMMUNICATIONS, INC.
SUBORDINATED SECURED CONVERTIBLE PROMISSORY NOTE
$500,000 Newark, California
January 29, 1997
SOCKET COMMUNICATIONS, INC., a Delaware corporation (the "COMPANY"), for
value received, hereby promises to pay to the order of Cetronic AB or holder
("HOLDER") in lawful money of the United States at the address of Holder set
forth below, the principal amount of Five Hundred Thousand Dollars ($500,000),
together with simple interest at the rate of eight percent (8%) per annum
(calculated on the basis of actual days elapsed and a year of 365 days).
Subject to the following sentence, accrued interest shall be payable in cash
only at the time the Company pays any portion of the principal amount of this
Note. If this Note is converted pursuant to Section 4 hereof, accrued interest
may be converted as set forth therein; any accrued interest that is not so
converted shall be payable in cash.
The following is a statement of the rights of Holder and the conditions to
which this Note is subject, and to which the Holder hereof, by the acceptance of
this Note, agrees. THE OBLIGATIONS DUE UNDER THIS NOTE ARE SECURED BY A
SECURITY AGREEMENT (THE "SECURITY AGREEMENT") DATED OF EVEN DATE HEREWITH AND
EXECUTED BY COMPANY IN FAVOR OF HOLDER. ADDITIONAL RIGHTS OF HOLDER ARE SET
FORTH IN THE SECURITY AGREEMENT.
1. PAYMENTS; PREPAYMENTS.
(a) All principal, interest and other amounts due hereunder shall be due
and payable on the earlier of (i) July 29, 1997 (the "MATURITY DATE") and
(ii) the day on which this Note becomes immediately due and payable pursuant to
Section 10 hereof.
(b) This Note may be prepaid, in whole or in part, from time to time ten
(10) business days after Holder receives written notice of such prepayment from
the Company; Holder shall then have until the end of such ten (10) business day
period to notify the Company in writing that it wishes to convert all or part of
the outstanding principal and accrued interest under this Note into Common Stock
pursuant to Section 4 below. Prepayments shall be (i) reduced by any amounts
that Holder desires to so convert into Common Stock and then (ii) applied first
to outstanding interest, and then to principal.
(c) Upon payment in full of all principal and interest payable hereunder,
this Note shall be surrendered to Company for cancellation.
<PAGE>
Socket Communications, Inc.
Subordinated Secured Convertible
Promissory Note
Page 2
2. SUBORDINATION.
(a) "Senior Indebtedness" means the principal of and premium, if any, and
interest on indebtedness of the Company incurred pursuant to the Promissory Note
and Loan Agreement, each dated as of July 5, 1995, between the Company and
CivicBank of Commerce. The Company agrees and the holder of this Note, by
acceptance thereof, agrees, expressly for the benefit of the holder of the
Senior Indebtedness, that, except as otherwise provided herein, upon (i) an
event of default under the Senior Indebtedness, or (ii) any dissolution, winding
up, or liquidation of the company, whether or not in bankruptcy, insolvency or
receivership proceedings, the Company shall not pay, and the holder of such Note
shall not be entitled to receive, any amount in respect of the principal and
interest of such Note unless and until the Senior Indebtedness shall have been
paid or otherwise discharged. Upon (1) an event of default under the Senior
Indebtedness, or (2) any dissolution, winding up or liquidation of the Company,
any payment or distribution of assets of the Company, which the holder of this
Note would be entitled to receive but for the provisions hereof, shall be paid
by the liquidating trustee or agent or other person making such payment or
distribution directly to the holder of the Senior Indebtedness ratably according
to the aggregate amounts remaining unpaid on the Senior Indebtedness after
giving effect to any concurrent payment or distribution to the holder of the
Senior Indebtedness. Subject to the payment in full of the Senior Indebtedness
and until this Note is paid in full, the holder of this Note shall be subrogated
to the rights of the holder of the Senior Indebtedness (to the extent of
payments or distribution s previously made to the holder of the Senior
Indebtedness pursuant to this Section 2(a)) to receive payments or distributions
of assets of the Company applicable to the Senior Indebtedness.
(b) This Section 2 is not intended to impair, as between the Company, its
creditors (other than the holder of the Senior Indebtedness) and the holder of
this Note, the unconditional and absolute obligation of the Company to pay the
principal of and interest on the Note or affect the relative rights of the
holder of this Note and the other creditors of the Company, other than the
holder of the Senior Indebtedness. Nothing in this Note shall prevent the
holder of this Note from exercising all remedies otherwise permitted by
applicable law upon default under the Note, subject to the rights, if any, of
the holder of the Senior Indebtedness in respect to cash, property or securities
of the Company received upon the exercise of any such remedy.
(c) Notwithstanding anything to the contrary herein, the holder of this
Note shall have the first priority security interest set forth in the Security
Agreement, and the subordination provisions of this Section 2 shall not apply to
the Collateral, as defined in the Security Agreement, or any proceeds from the
sale or other disposition thereof.
3. EVENTS OF DEFAULT. The occurrence of any of the following shall constitute
an "Event of Default" under this Note:
(a) The Company's failure to pay (i) when due any principal payment on the
due date hereunder of (ii) any interest or other payment required under the
terms of this Note on the date due, and failure to make such payment within five
(5) business days of Company's receipt of Holder's written notice to Company of
such failure to pay;
(b) Any representation or warranty made by the Company in section 3 of the
Security Agreement shall be false, incorrect or misleading in any material
respect when made; or
<PAGE>
Socket Communications, Inc.
Subordinated Secured Convertible
Promissory Note
Page 3
(c) The Company shall fail to perform any covenant set forth in section 4
of the Security Agreement.
4. CONVERSION.
(a) In lieu of receiving cash payment for principal amounts and accrued
interest due under this Note, Holder shall have the right to convert outstanding
principal and accrued interest under this Note into Common Stock of the Company
at a conversion price per share equal to $1.00 (the "CONVERSION PRICE") at any
time on or prior to the Maturity Date.
(b) In addition to the conversion right provided in Section 4(a) above,
upon an Event of Default, in lieu of receiving cash payment for principal
amounts and accrued interest due under this Note, Holder shall have the right to
convert outstanding principal and accrued interest under this Note into Common
Stock of the Company at a conversion price per share equal to the lower of
(i) the Conversion Price or (ii) 65% of the average closing price of the
Company's Common Stock on the OTC Bulletin Board or Nasdaq SmallCap Market, as
applicable, for the five (5) business days prior to the date of the Event of
Default.
(c) Holder may exercise its conversion right by providing written notice
to the Company of Holder's intention to exercise its conversion right and the
amount of principal and accrued interest that it wishes to convert (the
"CONVERSION AMOUNT") at least ten (10) days prior to the date on which it wishes
to convert (the "CONVERSION DATE") (unless such notice is given pursuant to the
terms of Section 1(b) above, in which event notice shall comply with the terms
thereof). No fractional shares of Common Stock shall be issued upon conversion
of this Note. Promptly after the conversion of this Note, the Holder shall
surrender this Note, duly endorsed, at the principal office of Company. At its
expense, Company shall, as soon as practicable thereafter (or as otherwise noted
in the provisions above), issue and deliver to such Holder at such principal
office a certificate or certificates for the number of shares of such Common
Stock to which the Holder shall be entitled upon such conversion (bearing such
legends as are required by applicable state and federal securities laws in the
opinion of counsel to Company). In addition, unless this Note has been fully
converted, a new Note representing the principal amount that shall not have been
converted into Common Stock shall also be issued to Holder as soon as possible
thereafter. Upon conversion of this Note in full, Company shall be forever
released from all its obligations and liabilities under this Note including
principal, interest and any other amounts due and owing pursuant hereto. Any
notice from the Holder of an election to convert by the Company shall be
irrevocable.
(d) If at any time the number of authorized but unissued shares of Common
Stock shall not be sufficient to effect the conversion of the entire outstanding
principal amount and accrued interest under this Note, Company will use its best
efforts to take such corporate action as may be necessary, in the opinion of its
counsel, to increase its authorized but unissued shares of Common Stock to such
number of shares as shall be sufficient for such purposes.
5. REGISTRATION RIGHT.
(a) Following the Maturity Date, and within a reasonable amount of time
following the conversion by Holder of any outstanding principal and accrued
interest under this Note into Common Stock of the Company, the Company will use
reasonable efforts to (i) file a registration statement under the Securities Act
of 1933, as amended (the "SECURITIES ACT") registering such shares for resale to
the public, (ii)
<PAGE>
Socket Communications, Inc.
Subordinated Secured Convertible
Promissory Note
Page 4
have such registration statement declared effective by the Securities and
Exchange Commission, (iii) register and qualify the securities covered by
such registration statement under the Blue Sky laws of such jurisdictions as
shall be reasonably requested by the Holder (provided that the Company shall
not be required in connection therewith or as a condition thereto to qualify
to do business or to file a general consent to service of process in any such
states or jurisdictions, unless the Company is already subject to service in
such jurisdiction and except as may be required by the Securities Act), (iv)
cause all securities registered pursuant hereunder to be listed on each
securities exchange on which similar securities issued by the Company are
then listed, and (v) file updates to such registration statement as necessary
to keep it effective until the date that all remaining such shares may be
sold to the public without registration within a period of 90 days; PROVIDED
THAT, the Company may suspend such registration for up to two periods of not
more than 90 days each in any 12-month period if necessary (x) to enable the
Company to update the registration statement or (y) to undertake another sale
of securities.
(b) All Registration Expenses (as hereafter defined) incurred in
connection with any registration pursuant to this Section 5 shall be borne by
the Company. "Registration Expenses" shall mean all expenses incurred by the
Company in complying with this Section 5, including, without limitation, all
registration, qualification and filing fees, printing expenses, fees and
disbursements of counsel for the Company, the reasonable cost of one special
legal counsel to represent Holder in any such registration, and blue sky fees
and expenses. "Registration Expense" shall not include (if applicable) any
underwriting discounts or selling commissions.
(c) INDEMNIFICATION.
(i) The Company will indemnify the Holder, each of its officers and
directors and partners, and each person controlling such Holder within the
meaning of Section 15 of the Securities Act, with respect to which registration,
qualification or compliance has been effected pursuant to this Section 5,
against all expenses, claims, losses, damages or liabilities (or actions in
respect thereof), including any of the foregoing incurred in settlement of any
litigation, commenced or threatened, arising out of or based on any untrue
statement (or alleged untrue statement) of a material fact contained in any
registration statement, prospectus, preliminary prospectus, offering circular or
other document, or any amendment or supplement thereto, incident to any such
registration, qualification or compliance, or based on any omission (or alleged
omission) to state therein a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances in which
they were made, not misleading, or any violation or any alleged violation by the
Company of any rule or regulation promulgated under the Securities Act or the
Exchange Act or any state securities law applicable to the Company in connection
with any such registration, qualification or compliance, and the Company will
reimburse each such Holder, each of its officers and directors, and each person
controlling such Holder, for any legal and any other expenses reasonably
incurred in connection with investigating, preparing or defending any such
claim, loss, damage, liability or action, as such expenses are incurred,
provided that the Company will not be liable in any such case to the extent that
any such claim, loss damage, liability or expense arises out of or is based on
any untrue statement or omission or alleged untrue statement or omission, made
in reliance upon and in conformity with written information furnished to the
Company by an instrument duly executed by such Holder or controlling person and
stated to be specifically for use therein.
(ii) The Holder will indemnify the Company, each of its directors and
officers, and each person who controls the Company within the meaning of Section
15 of the Securities Act against all claims,
<PAGE>
Socket Communications, Inc.
Subordinated Secured Convertible
Promissory Note
Page 5
losses, damages and liabilities (or actions in respect thereof) arising out
of or based on any untrue statement (or alleged untrue statement) of a
material fact contained in any such registration statement, prospectus,
offering circular or other document, or any omission (or alleged omission) to
state therein a material fact required to be stated therein or necessary to
make the statements therein not misleading, and will reimburse the Company,
such directors, officers or control persons for any legal or any other
expenses reasonably incurred in connection with investigating or defending
any such claim, loss, damage, liability or action, as such expenses are
incurred, in each case to the extent, but only to the extent, that such
untrue statement (or alleged untrue statement) or omission (or alleged
omission) is made in such registration statement, prospectus, offering
circular or other document in reliance upon and in conformity with written
information furnished to the Company by an instrument duly executed by such
holder and stated to be specifically for use therein.
6. RIGHT OF PARTICIPATION. Upon the first (and only the first) offering (or
series of related offerings in any 90-day period) by the Company subsequent to
the date hereof of any shares of, or securities convertible into or exercisable
for any shares of, any of its capital stock ("SECURITIES"), the Company shall
offer to the Holder and each of its affiliates that holds a Subordinated
Convertible Promissory Note issued by the Company (collectively, the "AFFILIATED
HOLDERS") the option to purchase up to an aggregate of $2,000,000 worth of the
offered Securities not to exceed 50% of the offering (the "AFFILIATED HOLDER
MAXIMUM"), in accordance with the following provisions:
(a) The Company shall deliver a notice to the Holder stating (i) its bona
fide intention to offer such Securities, (ii) the number of such Securities to
be offered, (iii) the price, if any, for which it proposes to offer such
Securities, and (iv) the terms of such offer. The Holder will distribute this
notice to the other Affiliated Holders, and the Affiliated Holders will
apportion the Affiliated Holder Maximum amongst themselves as they see fit.
(b) Within fifteen (15) calendar days after receipt of the Notice, the
Holder will notify the Company of the portion of the Affiliated Holder Maximum
that the Affiliated Holders wish to purchase, along with a detailed list of the
apportionment of such Affiliated Holder Maximum amongst the Affiliated Holders.
(c) The right of participation in this Section 6 shall not be applicable
(i) to the issuance or sale of shares of capital stock (or options therefor) to
employees, officers, directors or consultants for the primary purpose of
soliciting or retaining their services, (ii) to the issuance or sale of the
Company's securities to leasing entities or financial institutions in connection
with commercial leasing or borrowing transactions, or (iii) to conversions of
convertible securities.
7. REPRESENTATIONS AND WARRANTIES OF HOLDER. By its acceptance hereof, Holder
represents and warrants to Company that:
(a) Holder has been advised that this Note and the Common Stock of the
Company issuable upon conversion of the Note (with the Note and such Common
Stock being hereinafter collectively referred to as the "Securities") have not
been registered under the Securities Act, or any state securities laws and,
therefore, cannot be resold unless such Securities are registered under the
Securities Act and applicable state securities laws or unless an exemption from
such registration requirements is available. Holder has not been formed solely
for the purpose of making this investment and is acquiring the Securities for
its own account for investment, not as a nominee or agent, and not with a view
to, or for resale in connection with, the
<PAGE>
Socket Communications, Inc.
Subordinated Secured Convertible
Promissory Note
Page 6
distribution thereof. Holder has such knowledge and experience in financial
and business matters that such Holder is capable of evaluating the merits and
risks of such investment, is able to incur a complete loss of such investment
and is able to bear the economic risk of such investment for an indefinite
period of time.
(b) Holder acknowledges that Company has given Holder access to all
documents and other information required for Holder to make an informed decision
with respect to the acceptance of the Securities. In this regard, Holder
acknowledges that it has received and reviewed, among other things, the
following documents filed by the Company with the Securities and Exchange
Commission: (i) the Company's Quarterly Report on Form 10-QSB for the quarter
ended September 30, 1996 and (ii) the Company's Annual Report on Form 10-KSB for
the year ended December 31, 1995.
(c) At the time of both the offer and execution of the Note, the Holder
was neither a United States citizen nor a person in the United States.
(d) During the term of the Note, the Holder does not intend to sell any of
the Company Common Stock issuable upon conversion of the Notes to any United
States citizen or person in the United States.
8. ATTORNEYS' FEES. If the indebtedness represented by this Note or any part
thereof is collected in bankruptcy, receivership or other judicial proceedings
or if this Note is placed in the hands of attorneys for collection after
default, Company agrees to pay, in addition to the principal and interest
payable hereunder, reasonable attorneys' fees and costs incurred by Holder.
9. NOTICES. Except as otherwise provided herein, all notices, requests,
demands, consents, instructions or other communications to or upon the Company
or Holder hereunder shall be by telecopy or in writing and telecopied, mailed or
delivered to each party at telecopier number or its address set forth below (or
to such other telecopy number or address as the recipient of any notice shall
have notified the other in writing). All such notices and communications shall
be effective (a) when sent by Federal Express or other overnight service of
recognized standing, on the business day following the deposit with such service
(if sent to an address in the same country as the sender) or on the third
business day following the deposit with such service (if sent to an address in a
different country from the sender); (b) when mailed, by registered or certified
mail, first class postage prepaid and addressed as aforesaid through the United
States Postal Service, upon receipt; (c) when delivered by hand, upon delivery;
and (d) when telecopied, upon confirmation of receipt.
HOLDER: Cetronic AB
Box 153, S-864
22 Matfors
SWEDEN
Attention: President
011-46-6067-1300 (telephone)
011-46-6067-1309 (telecopy)
COMPANY: Socket Communications, Inc.
37400 Central Court
Newark, CA 94560
Attention: Chief Financial Officer
<PAGE>
Socket Communications, Inc.
Subordinated Secured Convertible
Promissory Note
Page 7
(415) 744-2700 (telephone)
(415) 744-2727 (telecopy)
10. ACCELERATION. This Note shall become immediately due and payable (a) upon
an Event of Default, (b) if the Company commences any proceeding in bankruptcy
or for dissolution, liquidation, winding-up, composition or other relief under
state or federal bankruptcy laws, or (c) such proceedings are commenced against
the Company, or a receiver or trustee is appointed for the Company or a
substantial part of its property, and such proceeding or appointment is not
dismissed or discharged within 60 days after its commencement.
11. WAIVERS. Company hereby waives presentment, demand for performance, notice
of non-performance, protest, notice of protest and notice of dishonor. No delay
on the part of Holder in exercising any right hereunder shall operate as a
waiver of such right or any other right.
12. PAYMENT. Payment shall be made in lawful tender of the United States.
13. USURY. In the event any interest is paid on this Note which is deemed to
be in excess of the then legal maximum rate, then that portion of the interest
payment representing an amount in excess of the then legal maximum rate shall be
deemed a payment of principal and applied against the principal of this Note.
14. GOVERNING LAW. This Note and all actions arising out of or in connection
with this Note shall be governed by and construed in accordance with the laws of
the State of California, without regard to the conflicts of law provisions of
the State of California or of any other state or country.
15. SUCCESSORS AND ASSIGNS.
(a) The rights and obligations of the Company and the Holder of this Note
shall be binding upon and benefit the successors, assigns, heirs, administrators
and transferees of the parties.
(b) Holder shall not transfer this Note without the prior written consent
of Company, except that Holder may transfer the Note without such prior written
consent to a collection agency following an Event of Default.
<PAGE>
Socket Communications, Inc.
Subordinated Secured Convertible
Promissory Note
Page 8
(c) Neither this Note nor any of the rights, interests or obligations
hereunder may be assigned, by operation of law or otherwise, in whole or in
part, by Company without the prior written consent of the Holder except in
connection with an assignment in whole to a successor corporation to Company,
provided that such successor corporation acquires all or substantially all of
Company's property and assets and Holder's rights hereunder are not impaired.
SOCKET COMMUNICATIONS, INC.
Signature: /s/ David W. Dunlap
--------------------------------
Name: David W. Dunlap
------------------------------------
Title: Vice President & CFO
------------------------------------
<PAGE>
EXHIBIT C
FIRST AMENDMENT TO
SUBORDINATED SECURED CONVERTIBLE PROMISSORY NOTE
THIS FIRST AMENDMENT TO SUBORDINATED SECURED CONVERTIBLE PROMISSORY NOTE
(this "Amendment"), dated as of July 29, 1997, is entered into by and between
SOCKET COMMUNICATIONS, INC., a Delaware corporation (the "Company"), and
CETRONIC AKTIEBOLAG [PUBL] ("Holder").
WHEREAS, the Company issued to Holder a Subordinated Secured Convertible
Promissory Note dated January 29, 1997 in the principal amount of $500,000 (the
"Note"); and
WHEREAS, pursuant to Section 5.11 of that certain Combination Agreement
dated as of June 12, 1997 by and between the Company and Holder, Holder has
agreed to amend the Note to extend its maturity date to December 12, 1997.
NOW, THEREFORE, in consideration of the foregoing and the mutual agreements
set forth herein, the Company and Holder hereto agree as follows:
SECTION 1. AMENDMENT TO NOTE. Section 1 of the Note is hereby amended to
read in its entirety as follows:
"(a) Subject to the provisions of Section 1(c) hereof, all
principal, interest and other amounts due hereunder shall be due and
payable on the earlier of (i) December 12, 1997 (the "Maturity Date") and
(ii) the day on which this Note becomes immediately due and payable
pursuant to Section 10 hereof.
(b) This Note may be prepaid, in whole or in part, from time to time
ten (10) business days after Holder receives written notice of such
prepayment from the Company; Holder shall then have until the end of such
ten (10) business day period to notify the Company in writing that it
wishes to convert all or part of the outstanding principal and accrued
interest under this Note into Common Stock pursuant to Section 4 below.
Prepayments shall be (i) reduced by any amounts that Holder desires to so
convert into Common Stock and then (ii) applied first to outstanding
interest, and then to principal.
(c) In the event that the Combination Agreement is terminated other
than pursuant to Section 7.01(d) or (j), the Maturity Date of this Note
shall be extended so that it is that business day which is ninety (90) days
after the date of such termination.
(d) Upon payment in full of all principal and interest payable
hereunder, this Note shall be surrendered to Company for cancellation."
SECTION 2. NO OTHER MODIFICATION. With the exception of the changes to
the Note made herein, this Amendment in no way modifies the terms of the Note.
<PAGE>
First Amendment to Subordinated
Convertible Promissory Note
Page 2
SECTION 3. MISCELLANEOUS.
(a) COUNTERPARTS. This Amendment may be executed in one or more
counterparts, each of which shall be deemed to be an original, but all of
which taken together shall constitute one and the same agreement.
(b) GOVERNING LAW. This Amendment shall be governed by, and
construed in accordance with, the laws of the State of California as
applied to agreements made and performed in California by residents of the
State of California without regard to the conflicts of law provisions of
the State of California or of any other state or country.
(c) SEVERABILITY. If any term, provision, covenant or restriction
of this Amendment is held by a court of competent jurisdiction or other
authority to be invalid, void or unenforceable, the remainder of the terms,
provisions, covenants and restrictions of this Amendment shall remain in
full force and effect and shall in no way be affected, impaired or
invalidated.
IN WITNESS WHEREOF, the Company and Holder have caused this Amendment to be
executed as of the date and year first above written.
SOCKET COMMUNICATIONS, INC.
By:
----------------------------------
Charlie Bass,
Acting President and
Chief Executive Officer
CETRONIC AKTIEBOLAG [PUBL]
Signature:
----------------------------
Name:
--------------------------------
Title:
--------------------------------
<PAGE>
EXHIBIT C
SECOND AMENDMENT TO
SUBORDINATED SECURED CONVERTIBLE PROMISSORY NOTE
THIS SECOND AMENDMENT TO SUBORDINATED SECURED CONVERTIBLE PROMISSORY NOTE
(this "AMENDMENT"), dated as of September 15, 1997, is entered into by and
between SOCKET COMMUNICATIONS, INC., a Delaware corporation (the "COMPANY"), and
CETRONIC AKTIEBOLAG [PUBL] ("HOLDER").
WHEREAS, the Company issued to Holder a Subordinated Secured Convertible
Promissory Note dated January 29, 1997 in the principal amount of $500,000;
WHEREAS, the Company and Holder wish to amend the Note to subordinate the
indebtedness of the Company to Holder under the Note to the indebtedness of the
Company to World Trade Finance, Inc. ("WORLD TRADE") under financial
accommodations World Trade proposes to provide to the Company.
NOW, THEREFORE, in consideration of the foregoing and the mutual agreements
set forth herein, the Company and Holder hereto agree as follows:
SECTION 1. AMENDMENT TO NOTE. Sections 2(a) and 2(b) of the Note are
hereby amended to read in their entirety as follows:
"(a) "Senior Indebtedness" means (A) the principal of and premium, if
any, and interest on indebtedness of the Company incurred pursuant to the
Promissory Note and Loan Agreement, each dated as of July 5, 1995, between
the Company and CivicBank of Commerce; and (B) all present and future
indebtedness, obligations, liabilities, claims, rights and demands of any
kind which may be now or hereafter owing from the Company to World Trade in
connection with that certain Note in the amount of $500,000 (or such lesser
amount as the Company and World Trade may finally agree) issued by the
Company in favor of World Trade and a related Commercial Security Agreement
and Commercial Pledge Agreement between the Company and World Trade,
including, without limitation, all principal, all interest, all costs and
attorneys' fees, all sums paid for the purpose of protecting World Trade's
rights in security (such as paying for insurance on collateral if the owner
fails to do so), and all other obligations of the Company to World Trade,
secured or unsecured, of any nature whatsoever. The Company agrees and the
holder of this Note, by acceptance thereof, agrees, expressly for the
benefit of the holder of the Senior Indebtedness, that, except as otherwise
provided herein, upon (i) an event of default under the Senior
Indebtedness, or (ii) any dissolution, winding up, or liquidation of the
Company, whether or not in bankruptcy, insolvency or receivership
proceedings, the Company shall not pay, and the holder of such Note shall
not be entitled to receive, any amount in respect of the principal and
interest of such Note unless and until the Senior Indebtedness shall have
been paid or otherwise discharged. Upon (1) an event of default under the
Senior Indebtedness, or (2) any dissolution, winding up or liquidation of
the Company, any payment or distribution of assets of the Company, which
the holder of this Note would be entitled to receive but for the provisions
hereof, shall be paid by the liquidating trustee or agent or other person
making such payment or distribution directly to the holders of the Senior
Indebtedness ratably according to the aggregate amounts remaining unpaid on
the Senior Indebtedness after giving effect to any concurrent payment or
distribution to the holders of the Senior Indebtedness. Subject to the
payment in full of the Senior Indebtedness and until this Note is paid in
full, the holder of this Note shall be subrogated to the rights of the
holders of the Senior Indebtedness (to the extent of payments or
distributions previously made to the holders of the Senior Indebtedness
pursuant to this Section 2(a)) to receive payments or distributions of
assets of the Company applicable to the Senior Indebtedness.
<PAGE>
Second Amendment to Subordinated
Convertible Promissory Note
Page2
(b) This Section 2 is not intended to impair, as between the
Company, its creditors (other than the holders of the Senior Indebtedness)
and the holder of this Note, the unconditional and absolute obligation of
the Company to pay the principal of and interest on the Note or affect the
relative rights of the holder of this Note and the other creditors of the
Company, other than the holders of the Senior Indebtedness. Nothing in
this Note shall prevent the holder of this Note from exercising all
remedies otherwise permitted by applicable law upon default under the Note,
subject to the rights, if any, of the holders of the Senior Indebtedness in
respect to cash, property or securities of the Company received upon the
exercise of any such remedy."
SECTION 2. NO OTHER MODIFICATION. With the exception of the changes to
the Note made herein, this Amendment in no way modifies the terms of the Note.
SECTION 3. MISCELLANEOUS.
(a) COUNTERPARTS. This Amendment may be executed in one or more
counterparts, each of which shall be deemed to be an original, but all of
which taken together shall constitute one and the same agreement.
(b) GOVERNING LAW. This Amendment shall be governed by, and
construed in accordance with, the laws of the State of California as
applied to agreements made and performed in California by residents of the
State of California without regard to the conflicts of law provisions of
the State of California or of any other state or country.
(c) SEVERABILITY. If any term, provision, covenant or restriction
of this Amendment is held by a court of competent jurisdiction or other
authority to be invalid, void or unenforceable, the remainder of the terms,
provisions, covenants and restrictions of this Amendment shall remain in
full force and effect and shall in no way be affected, impaired or
invalidated.
<PAGE>
Second Amendment to Subordinated
Convertible Promissory Note
Page 3
IN WITNESS WHEREOF, the Company and Holder have caused this Amendment to be
executed as of the date and year first above written.
SOCKET COMMUNICATIONS, INC.
By:
----------------------------------
Charlie Bass,
Acting President and
Chief Executive Officer
CETRONIC AKTIEBOLAG [PUBL]
Signature:
----------------------------
Name:
--------------------------------
Title:
--------------------------------
<PAGE>
EXHIBIT D
THE SECURITIES REPRESENTED BY THIS INSTRUMENT HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR QUALIFIED UNDER APPLICABLE STATE
SECURITIES LAWS AND HAVE BEEN TAKEN FOR INVESTMENT PURPOSES ONLY AND NOT WITH A
VIEW TO OR FOR SALE IN CONNECTION WITH ANY DISTRIBUTION THEREOF. THE SECURITIES
MAY NOT BE SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION AND
QUALIFICATION WITHOUT, EXCEPT UNDER CERTAIN SPECIFIC LIMITED CIRCUMSTANCES, AN
OPINION OF COUNSEL FOR THE HOLDER, CONCURRED IN BY COUNSEL FOR THE COMPANY, THAT
SUCH REGISTRATION AND QUALIFICATION ARE NOT REQUIRED.
SOCKET COMMUNICATIONS, INC.
SUBORDINATED CONVERTIBLE PROMISSORY NOTE
Newark, California
$500,000 June 12, 1997
SOCKET COMMUNICATIONS, INC., a Delaware corporation (the "COMPANY"), for
value received, hereby promises to pay to the order of Cetronic Aktiebolag
[Publ] or holder ("HOLDER") in lawful money of the United States at the address
of Holder set forth below, the principal amount of Five Hundred Thousand Dollars
($500,000), together with simple interest at the rate of eight percent (8%) per
annum (calculated on the basis of actual days elapsed and a year of 365 days).
Subject to the following sentence, accrued interest shall be payable in cash
only at the time the Company pays any portion of the principal amount of this
Note. If this Note is converted pursuant to Section 4 hereof, accrued interest
may be converted as set forth therein; any accrued interest that is not so
converted shall be payable in cash.
This Note has been executed in connection with a Combination Agreement
dated as of June 12, 1997 by and between the Company and the Holder (the
"COMBINATION AGREEMENT") pursuant to which the Company will acquire all of the
outstanding shares of the Holder and the Holder will become a wholly-owned
subsidiary of the Company.
The following is a statement of the rights of Holder and the conditions to
which this Note is subject, and to which the Holder hereof, by the acceptance of
this Note, agrees.
1. PAYMENTS; PREPAYMENTS.
(a) Subject to the provisions of Section 1(c) hereof, all principal,
interest and other amounts due hereunder shall be due and payable on the earlier
of (i) December 12, 1997 (the "MATURITY DATE") and (ii) the day on which this
Note becomes immediately due and payable pursuant to Section 10 hereof.
(b) This Note may be prepaid, in whole or in part, from time to time ten
(10) business days after Holder receives written notice of such prepayment from
the Company; Holder shall then have until the end of such ten (10) business day
period to notify the Company in writing that it wishes to convert all or part of
the outstanding principal and accrued interest under this Note into Common Stock
pursuant to Section 4 below. Prepayments shall be (i) reduced by any amounts
that Holder desires to so convert into Common Stock and then (ii) applied first
to outstanding interest, and then to principal.
<PAGE>
Socket Communications, Inc.
Subordinated Convertible
Promissory Note
June 12, 1997
Page 2
(c) In the event that the Combination Agreement is terminated other than
pursuant to Section 7.01(d) or (j), the maturity Date of this Note shall be
extended to the business day which is ninety (90) days after the date of such
termination.
(d) upon payment in full of all principal and interest payable hereunder,
this Note shall be surrendered to Company for cancellation.
(e) In the event that the Combination Agreement is terminated and Sections
7.05(c) thereof is applicable, Cetronic shall convert outstanding principal and
accrued interest under this Note into Common stock of the Company in accordance
with the terms hereof and the Combination Agreement.
2. SUBORDINATION
(a) "Senior Indebtedness" means the principal of and premium, if any, and
interest on indebtedness of the Company incurred pursuant to the Promissory Note
and Loan Agreement, each dated as of July 5, 1995, between the Company and
CivicBank of Commerce. The company agrees and the Holder of this Note, by
acceptance thereof, agrees, expressly for the benefit of the holder of the
Senior Indebtedness, that, except as otherwise provided herein, upon (i) an
event of default under the Senior Indebtedness, or (ii) any dissolution, winding
up, or liquidation of the Company, whether or not in bankruptcy, insolvency or
receivership proceedings, the Company shall not pay, and the holder of such Note
shall not be entitled to receive, any amount in respect of the principal and
interest of such Note unless and until the Senior Indebtedness shall have been
paid or otherwise discharged. Upon (1) an event of default under the Senior
Indebtedness, or (2) any dissolution, winding up or liquidation of the Company,
any payment or distribution of assets of the Company, which the holder of this
Note would be entitled to receive but for the provisions hereof, shall be paid
by the liquidating trustee or agent or other person making such payment or
distribution directly to the holder of the Senior Indebtedness ratably according
to the aggregate amounts remaining unpaid on the Senior Indebtedness after
giving effect to any concurrent payment or distribution to the holder of the
Senior Indebtedness. Subject to the payment in full of the Senior Indebtedness
and until this Note is paid in full, the holder of this Note shall be subrogated
to the rights of the holder of the Senior Indebtedness (to the extent of
payments of distributions previously made to the holder of the Senior
Indebtedness pursuant to this Section 2(a)) to receive payments or distributions
of assets of the Company applicable to the Senior Indebtedness.
(b) This Section 2 is not intended to impair, as between the Company, its
creditors (other than the holder of the Senior Indebtedness) and the holder of
this Note, the unconditional and absolute obligation of the Company to pay the
principal of and interest on the Note or affect the relative rights of the
holder of this Note and the other creditors os the Company, other than the
holder of the Senior Indebtedness. Nothing in this Note shall prevent the
holder of this Note from exercising all remedies otherwise permitted by
applicable law upon default under the Note, subject to the rights, if any, of
the holder of the Senior Indebtedness in respect to cash, property or securities
of the Company received upon the exercise of any such remedy.
3. EVENTS OF DEFAULT. The Company's failure to pay (i) when due any principal
payment on the due date hereunder or (ii) any interest or other payment required
under the terms of this Note on the date due, and failure to make such payment
within five (5) business days of Company's receipt of Holder's written notice to
Company of such failure to pay, shall constitute an "Event of Default" under
this Note.
<PAGE>
Socket Communications, Inc.
Subordinated Convertible
Promissory Note
June 12, 1997
Page 3
4. CONVERSION.
(a) In lieu of receiving cash payment for principal amounts and accrued
interest due under this Note, Holder shall have the right to convert outstanding
principal and accrued interest under this Note into Common Stock of the Company
at a conversion price per share equal to $1.00 (the "CONVERSION PRICE") at any
time on or prior to the Maturity Date.
(b) In addition to the conversion right provided in Section 4(a) above,
upon an Event of Default, in lieu of receiving cash payment for principal
amounts and accrued interest due under this Note, Holder shall have the right to
convert outstanding principal and accrued interest under this Note into Common
Stock of the Company at a conversion price per share equal to the lower of
(i) the Conversion Price or (ii) 65% of the average closing price of the
Company's Common Stock on the OTC Bulletin Board or Nasdaq SmallCap market, as
applicable, for the five (5) business days prior to the date of the Event of
Default.
(c) Holder may exercise its conversion right by providing written notice
to the Company of Holder's intention to exercise its conversion right and the
amount of principal and accrued interest that it wishes to convert (the
"CONVERSION AMOUNT") at least ten (10) days prior to the date on which it wishes
to convert (the "CONVERSION DATE") (unless such notice is given pursuant to the
terms of Section 1(b) above, in which event notice shall comply with the terms
thereof). No fractional shares of Common Stock shall be issued upon conversion
of this Note. Promptly after the conversion of this Note, the Holder shall
surrender this Note, duly endorsed, at the principal office of Company. At its
expense, Company shall, as soon as practicable thereafter (or as otherwise noted
in the provisions above), issue and deliver to such Holder at such principal
office a certificate or certificates for the number of shares of such Common
Stock to which the Holder shall be entitled upon such conversion (bearing such
legends as are required by applicable state and federal securities laws in the
opinion of counsel to Company). In addition, unless this Note has been fully
converted, a new Note representing the principal amount that shall not have been
converted into Common Stock shall also be issued to Holder as soon as possible
thereafter. Upon conversion of this Note in full, Company shall be forever
released from all its obligations and liabilities under this Note including
principal, interest and any other amounts due and owing pursuant hereto. Any
notice from the Holder of an election to convert by the Company shall be
irrevocable.
(d) If at any time the number of authorized but unissued shares of Common
Stock shall not be sufficient to effect the conversion of the entire outstanding
principal amount and accrued interest under this Note, Company will use its best
efforts to take such corporate action as may be necessary, in the opinion of its
counsel, to increase its authorized but unissued shares of Common Stock to such
number of shares as shall be sufficient for such purposes.
(e) In the event that the Combination Agreement is terminated and Section
7.05(c) thereof is applicable, Cetronic shall convert outstanding principal and
accrued interest under this Note into Common Stock of the Company in accordance
with the terms hereof and the Combination Agreement.
5. REGISTRATION RIGHT.
(a) Following the Maturity Date, and within a reasonable amount of time
following the conversion by Holder of any outstanding principal and accrued
interest under this Note into Common Stock of the Company, the Company will use
reasonable efforts to (i) file a registration statement under the
<PAGE>
Socket Communications, Inc.
Subordinated Convertible
Promissory Note
June 12, 1997
Page 4
Securities Act of 1933, as amended (the "SECURITIES ACT") registering such
shares for resale to the public, (ii) have such registration statement
declared effective by the Securities and Exchange Commission, (iii) register
and qualify the securities covered by such registration statement under the
Blue Sky laws of such jurisdictions as shall be reasonably requested by the
Holder (provided that the Company shall not be required in connection
therewith or as a condition thereto to qualify to do business or to file a
general consent to service of process in any such states or jurisdictions,
unless the Company is already subject to service in such jurisdiction and
except as may be required by the Securities Act), (iv) cause all securities
registered pursuant hereunder to be listed on each securities exchange on
which similar securities issued by the Company are then listed, and (v) file
updates to such registration statement as necessary to keep it effective
until the date that all remaining such shares may be sold to the public
without registration within a period of 90 days; PROVIDED THAT, the Company
may suspend such registration for up to two (2) periods of not more than 90
days each in any 12-month period if necessary (x) to enable the Company to
update the registration statement or (y) to undertake another sale of
securities.
(b) All Registration Expenses (as hereafter defined) incurred in
connection with any registration pursuant to this Section 5 shall be borne by
the Company. "Registration Expenses" shall mean all expenses incurred by the
Company in complying with this Section 5, including, without limitation, all
registration, qualification and filing fees, printing expenses, fees and
disbursements of counsel for the Company, the reasonable costs of one special
legal counsel to represent Holder in any such registration, and blue sky fees
and expenses. "Registration Expenses" shall not include (if applicable) any
underwriting discounts or selling commissions.
(c) INDEMNIFICATION.
(i) The Company will indemnify the Holder, each of its officers and
directors and partners, and each person controlling such Holder within the
meaning of Section 15 of the Securities Act, with respect to which registration,
qualification or compliance has been effected pursuant to this Section 5,
against all expenses, claims, losses, damages or liabilities (or actions in
respect thereof), including any of the foregoing incurred in settlement of any
litigation, commenced or threatened, arising out of or based on any untrue
statement (or alleged untrue statement) of a material fact contained in any
registration statement, prospectus, preliminary prospectus, offering circular or
other document, or any amendment or supplement thereto, incident to any such
registration, qualification or compliance, or based on any omission (or alleged
omission) to state therein a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances in which
they were made, not misleading, or any violation or any alleged violation by the
Company of any rule or regulation promulgated under the Securities Act or the
Exchange Act or any state securities law applicable to the Company in connection
with any such registration, qualification or compliance, and the Company will
reimburse each such Holder, each of its officers and directors, and each person
controlling such Holder, for any legal and any other expenses reasonably
incurred in connection with investigating, preparing or defending any such
claim, loss, damage, liability or action, as such expenses are incurred,
provided that the Company will not be liable in any such case to the extent that
any such claim, loss, damage, liability or expense arises out of or is based on
any untrue statement or omission or alleged untrue statement or omission, made
in reliance upon and in conformity with written information furnished to the
Company by an instrument duly executed by such Holder or controlling person and
stated to be specifically for use therein.
<PAGE>
Socket Communications, Inc.
Subordinated Convertible
Promissory Note
June 12, 1997
Page 5
(ii) The Holder will indemnify the Company, each of its directors and
officers, and each person who controls the Company within the meaning of Section
15 of the Securities Act against all claims, losses, damages and liabilities (or
actions in respect thereof) arising out of or based on any untrue statement (or
alleged untrue statement) of a material fact contained in any such registration
statement, prospectus, offering circular or other document, or any omission (or
alleged omission) to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, and will reimburse
the Company, such directors, officers or control persons for any legal or any
other expenses reasonably incurred in connection with investigating or defending
any such claim, loss, damage, liability or action, as such expenses are
incurred, in each case to the extent, but only to the extent, that such untrue
statement (or alleged untrue statement) or omission (or alleged omission) is
made in such registration statement, prospectus, offering circular or other
document in reliance upon and in conformity with written information furnished
to the Company by an instrument duly executed by such Holder and stated to be
specifically for use therein.
6. RIGHT OF PARTICIPATION. Upon the first (and only the first) offering (or
series of related offerings in any 90-day period) by the Company subsequent to
the date hereof of any shares of, or securities convertible into or exercisable
for any shares of, any class of its capital stock ("SECURITIES"), the Company
shall offer to the Holder and each of its affiliates that holds a Subordinated
Convertible Promissory Note issued by the Company (collectively, the "AFFILIATED
HOLDERS") the option to purchase up to an aggregate of $2,000,000 worth of the
offered Securities not to exceed 50% of the offering (the "AFFILIATED HOLDER
MAXIMUM"), in accordance with the following provisions:
(a) The company shall deliver a notice to the Holder stating (i) its bona
fide intention to offer such Securities, (ii) the number of such Securities to
be offered, (iii) the price, if any, for which it proposes to offer such
Securities, and (iv) the terms of such offer. The Holder will distribute this
notice to the other Affiliated Holders, and the Affiliated Holders will
apportion the Affiliated Holder Maximum amongst themselves as they see fit.
(b) Within fifteen (15) calendar days after receipt of the Notice, the
Holder will notify the Company of the portion of the Affiliated Holder Maximum
that the Affiliated Holders wish to purchase, along with a detailed list of the
apportionment of such Affiliated Holder maximum amongst the Affiliated Holders.
(c) The right of participation in this Section 6 shall not be applicable
(i) to the issuance or sale of shares of capital stock (or options therefor) to
employees, officers, directors or consultants for the primary purpose of
soliciting or retaining their services, (ii) to the issuance or sale of the
Company's securities to leasing entities or financial institutions in connection
with commercial leasing or borrowing transactions, or (iii) to conversions of
convertible securities.
7. REPRESENTATIONS AND WARRANTIES OF HOLDER. By its acceptance hereof, Holder
represents and warrants to Company that:
(a) Holder has been advised that this Note and the Common Stock of the
Company issuable upon conversion of the Note (with the Note and such Common
Stock being hereinafter collectively referred to as the "SECURITIES") have not
been registered under the Securities Act, or any state securities laws and,
therefore, cannot be resold unless such Securities are registered under the
Securities Act and applicable state securities laws or unless an exemption from
such registration requirements is available. Holder has not been
<PAGE>
Socket Communications, Inc.
Subordinated Convertible
Promissory Note
June 12, 1997
Page 6
formed solely for the purpose of making this investment and is acquiring the
Securities for its own account for investment, not as a nominee or agent, and
not with a view to, or for resale in connection with, the distribution
thereof. Holder has such knowledge and experience in financial and business
matters that such Holder is capable of evaluating the merits and risks of
such investment, is able to incur a complete loss of such investment and is
able to bear the economic risk of such investment for an indefinite period of
time.
(b) Holder acknowledges that Company has given Holder access to all
documents and other information required for Holder to make an informed decision
with respect to the acceptance of the Securities. In this regard, Holder
acknowledges that it has received and reviewed, among other things, the
following documents filed by the Company with the Securities and Exchange
Commission: (i) the Company's Quarterly Report on Form 10-QSB for the quarter
ended March 31, 1997; (ii) the Company's Annual Report on Form 10-KSB for the
year ended December 31, 1996; and (iii) the Company's Proxy Statement relating
to its 1997 Annual Meeting of Stockholders.
(c) At the time of both the offer and execution of the Note, the Holder
was neither a United States citizen nor a person in the United States.
(d) During the term of the Note, the Holder does not intend to sell any of
the Company Common Stock issuable upon conversion of the Note to any United
States citizen or person in the United States.
8. ATTORNEYS' FEES. If the indebtedness represented by this Note or any part
thereof is collected in bankruptcy, receivership or other judicial proceedings
or if this Note is placed in the hands of attorneys for collection after
default, Company agrees to pay, in addition to the principal and interest
payable hereunder, reasonable attorneys' fees and costs incurred by Holder.
9. NOTICES. Except as otherwise provided herein, all notices, requests,
demands, consents, instructions or other communications to or upon the Company
or Holder hereunder shall be by telecopy or in writing and telecopied, mailed or
delivered to each party at telecopier number or its address set forth below (or
to such other telecopy number or address as the recipient of any notice shall
have notified the other in writing). All such notices and communications shall
be effective (a) when sent by Federal Express or other overnight service of
recognized standing, on the business day following the deposit with such service
(if sent to an address in the same country as the sender) or on the third
business day following the deposit with such service (if sent to an address in a
different country from the sender); (b) through the United States Postal
Service, upon receipt; (c) when delivered by hand, upon delivery; and (d) when
telecopied, upon confirmation of receipt.
HOLDER: Cetronic Aktiebolag [Publ]
------ Box 153, S-864
22 Matfors
SWEDEN
Attention: President
011-46-6067-1300 (telephone)
011-46-6067-1309 (telecopy)
<PAGE>
Socket Communications, Inc.
Subordinated Convertible
Promissory Note
June 12, 1997
Page 7
COMPANY: Socket Communications, Inc.
------- 37400 Central Court
Newark, CA 94560
Attention: Chief Financial Officer
(415) 744-2700 (telephone)
(415) 744-2727 (telecopy)
10. ACCELERATION. This Note shall become immediately due and payable (a) upon
an Event of Default, (b) if the Company commences any proceeding in bankruptcy
or for dissolution, liquidation, winding-up, composition or other relief under
state or federal bankruptcy laws, or (c) if such proceedings are commenced
against the Company, or a receiver or trustee is appointed for the Company or a
substantial part of its property, and such proceeding or appointment is not
dismissed or discharged within 60 days after its commencement.
11. WAIVERS. Company hereby waives presentment, demand for performance, notice
of non-performance, protest, notice of protest and notice of dishonor. No delay
on the part of Holder in exercising any right hereunder shall operate as a
waiver of such right or any other right.
12. PAYMENT. Payment shall be made in lawful tender of the United States.
13. USURY. In the event any interest is paid on this Note which is deemed to
be in excess of the then legal maximum rate, then that portion of the interest
payment representing an amount in excess of the then legal maximum rate shall be
deemed a payment of principal and applied against the principal of this Note.
14. GOVERNING LAW. This Note and all actions arising out of or in connection
with this Note shall be governed by and construed in accordance with the laws of
the State of California, without regard to the conflicts of law provisions of
the State of California or of any other state or country.
15. SUCCESSORS AND ASSIGNS.
(a) The rights and obligations of the Company and the Holder of this Note
shall be binding upon and benefit the successors, assigns, heirs, administrators
and transferees of the parties.
(b) Holder shall not transfer this Note without the prior written consent
of Company, except that Holder may transfer the Note without such prior written
consent to a collection agency following an Event of Default.
<PAGE>
Socket Communications, Inc.
Subordinated Convertible
Promissory Note
June 12, 1997
Page 8
(c) Neither this Note nor any of the rights, interests or obligations
hereunder may be assigned, by operation of law or otherwise, in whole or in
part, by Company without the prior written consent of the Holder except in
connection with an assignment in whole to a successor corporation to Company,
provided that such successor corporation acquires all or substantially all of
Company's property and assets and Holder's rights hereunder and under the
Security Agreement are not impaired.
SOCKET COMMUNICATIONS, INC.
Signature:
-------------------------
Name:
------------------------------
Title:
-----------------------------
Date:
------------------------------
Agreed and Accepted:
CETRONIC AKTIEBOLAG [PUBL]
Signature:
------------------------------
Name:
-----------------------------------
Title:
----------------------------------
Date:
-----------------------------------
<PAGE>
EXHIBIT D
FIRST AMENDMENT TO
SUBORDINATED CONVERTIBLE PROMISSORY NOTE
THIS FIRST AMENDMENT TO SUBORDINATED CONVERTIBLE PROMISSORY NOTE (this
"AMENDMENT"), dated as of September 15, 1997, is entered into by and between
SOCKET COMMUNICATIONS, INC., a Delaware corporation (the "COMPANY"), and
CETRONIC AKTIEBOLAG [PUBL] ("HOLDER").
WHEREAS, the Company issued to Holder a Subordinated Convertible Promissory
Note dated June 12, 1997 in the principal amount of $500,000;
WHEREAS, the Company and Holder wish to amend the Note to subordinate the
indebtedness of the Company to Holder under the Note to the indebtedness of the
Company to World Trade Finance, Inc. ("WORLD TRADE") under financial
accommodations World Trade proposes to provide to the Company.
NOW, THEREFORE, in consideration of the foregoing and the mutual agreements
set forth herein, the Company and Holder hereto agree as follows:
SECTION 1. AMENDMENT TO NOTE. Sections 2(a) and 2(b) of the Note are
hereby amended to read in their entirety as follows:
"(a) "Senior Indebtedness" means (A) the principal of and premium, if
any, and interest on indebtedness of the Company incurred pursuant to the
Promissory Note and Loan Agreement, each dated as of July 5, 1995, between
the Company and CivicBank of Commerce; and (B) all present and future
indebtedness, obligations, liabilities, claims, rights and demands of any
kind which may be now or hereafter owing from the Company to World Trade in
connection with that certain Note in the amount of $500,000 (or such lesser
amount as the Company and World Trade may finally agree) issued by the
Company in favor of World Trade and a related Commercial Security Agreement
and Commercial Pledge Agreement between the Company and World Trade,
including, without limitation, all principal, all interest, all costs and
attorneys' fees, all sums paid for the purpose of protecting World Trade's
rights in security (such as paying for insurance on collateral if the owner
fails to do so), and all other obligations of the Company to World Trade,
secured or unsecured, of any nature whatsoever. The Company agrees and the
holder of this Note, by acceptance thereof, agrees, expressly for the
benefit of the holder of the Senior Indebtedness, that, except as otherwise
provided herein, upon (i) an event of default under the Senior
Indebtedness, or (ii) any dissolution, winding up, or liquidation of the
Company, whether or not in bankruptcy, insolvency or receivership
proceedings, the Company shall not pay, and the holder of such Note shall
not be entitled to receive, any amount in respect of the principal and
interest of such Note unless and until the Senior Indebtedness shall have
been paid or otherwise discharged. Upon (1) an event of default under the
Senior Indebtedness, or (2) any dissolution, winding up or liquidation of
the Company, any payment or distribution of assets of the Company, which
the holder of this Note would be entitled to receive but for the provisions
hereof, shall be paid by the liquidating trustee or agent or other person
making such payment or distribution directly to the holders of the Senior
Indebtedness ratably according to the aggregate amounts remaining unpaid on
the Senior Indebtedness after giving effect to any concurrent payment or
distribution to the holders of the Senior Indebtedness. Subject to the
payment in full of the Senior Indebtedness and until this Note is paid in
full, the holder of this Note shall be subrogated to the rights of the
holders of the Senior Indebtedness (to the extent of payments or
distributions previously made to the holders of the Senior Indebtedness
pursuant to this Section 2(a)) to receive payments or distributions of
assets of the Company applicable to the Senior Indebtedness.
<PAGE>
First Amendment to Subordinated
Convertible Promissory Note
Page 2
(b) This Section 2 is not intended to impair, as between the
Company, its creditors (other than the holders of the Senior Indebtedness)
and the holder of this Note, the unconditional and absolute obligation of
the Company to pay the principal of and interest on the Note or affect the
relative rights of the holder of this Note and the other creditors of the
Company, other than the holders of the Senior Indebtedness. Nothing in
this Note shall prevent the holder of this Note from exercising all
remedies otherwise permitted by applicable law upon default under the Note,
subject to the rights, if any, of the holders of the Senior Indebtedness in
respect to cash, property or securities of the Company received upon the
exercise of any such remedy."
SECTION 2. NO OTHER MODIFICATION. With the exception of the changes to
the Note made herein, this Amendment in no way modifies the terms of the Note.
SECTION 3. MISCELLANEOUS.
(a) COUNTERPARTS. This Amendment may be executed in one or more
counterparts, each of which shall be deemed to be an original, but all of
which taken together shall constitute one and the same agreement.
(b) GOVERNING LAW. This Amendment shall be governed by, and
construed in accordance with, the laws of the State of California as
applied to agreements made and performed in California by residents of the
State of California without regard to the conflicts of law provisions of
the State of California or of any other state or country.
(c) SEVERABILITY. If any term, provision, covenant or restriction
of this Amendment is held by a court of competent jurisdiction or other
authority to be invalid, void or unenforceable, the remainder of the terms,
provisions, covenants and restrictions of this Amendment shall remain in
full force and effect and shall in no way be affected, impaired or
invalidated.
<PAGE>
First Amendment to Subordinated
Convertible Promissory Note
Page 3
IN WITNESS WHEREOF, the Company and Holder have caused this Amendment to be
executed as of the date and year first above written.
SOCKET COMMUNICATIONS, INC.
By:
---------------------------------------
Charlie Bass,
Acting President and
Chief Executive Officer
CETRONIC AKTIEBOLAG [PUBL]
Signature:
---------------------------------
Name:
-------------------------------------
Title:
------------------------------------
<PAGE>
EXHIBIT E
THE SECURITIES REPRESENTED BY THIS INSTRUMENT HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR QUALIFIED UNDER APPLICABLE STATE
SECURITIES LAWS AND HAVE BEEN TAKEN FOR INVESTMENT PURPOSES ONLY AND NOT WITH A
VIEW TO OR FOR SALE IN CONNECTION WITH ANY DISTRIBUTION THEREOF, THE SECURITIES
MAY NOT BE SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION AND
QUALIFICATION WITHOUT, EXCEPT UNDER CERTAIN SPECIFIC LIMITED CIRCUMSTANCES, AN
OPINION OF COUNSEL FOR THE HOLDER, CONCURRED IN BY COUNSEL FOR THE COMPANY, THAT
SUCH REGISTRATION AND QUALIFICATION ARE NOT REQUIRED.
SOCKET COMMUNICATIONS, INC.
SUBORDINATED CONVERTIBLE PROMISSORY NOTE
Newark, California
$__________ February 14, 1997
SOCKET COMMUNICATIONS, INC., a Delaware corporation (the "COMPANY"), for
value received, hereby promises to pay to the order of _______________ or holder
("HOLDER") in lawful money of the United States at the address of Holder set
forth below, the principal amount of ______________________ ($_______), together
with simple interest at the rate of eight percent (8%) per annum (calculated on
the basis of actual days elapsed and a year of 365 days). Accrued interest
shall be payable in cash only at the time the Company pays any portion of the
principal amount of this Note. If this Note is converted pursuant to Section 4
hereof, accrued interest may be converted as set forth therein; any accrued
interest that is not so converted shall be payable in cash.
The following is a statement of the rights of Holder and the conditions to
which this Note is subject, and to which the Holder hereof, by the acceptance of
this Note, agrees.
1. PAYMENTS; PREPAYMENTS.
(a) All Principal, interest and other amounts due hereunder shall be
due and payable on the earlier of (i) August 14, 1997 (the "MATURITY DATE") and
(ii) the day on which this Note becomes immediately due and payable pursuant to
Section 10 hereof.
(b) This Note may be prepaid, in whole or in part, from time to time
ten (10) business days after Holder receives written notice of such prepayment
from the Company; Holder shall then have until the end of such ten (10) business
day period to notify the Company in writing that it wishes to convert all or
part of the outstanding principal and accrued interest under this Note into
Common Stock pursuant to Section 4 below. Prepayments shall be (i) reduced by
any amounts that Holder desires to so convert into Common Stock and then (ii)
applied first to outstanding interest, and then to principal.
(c) Upon payment in full of all principal and interest payable
hereunder, this Note shall be surrendered to Company for cancellation.
<PAGE>
Socket Communications, Inc.
Subordinated Convertible Promissory Note
Page 2
2. SUBORDINATION.
(a) "Senior Indebtedness" means the principal of and premium, if
any, and interest on indebtedness of the Company incurred pursuant to the
Promissory Note and Loan Agreement, each dated as of July 5, 1995, between the
Company and CivicBank of Commerce. The Company agrees and the holder of this
Note, by acceptance thereof, agrees, expressly for the benefit of the holder of
the Senior Indebtedness, that, except as otherwise provided herein, upon (i) an
event of default under the Senior Indebtedness, or (ii) any dissolution, winding
up, or liquidation of the Company, whether or not in bankruptcy, insolvency or
receivership proceedings, the Company shall not pay, and the holder of such Note
shall not be entitled to receive, any amount in respect of the principal and
interest of such Note unless and until the Senior Indebtedness shall have been
paid or otherwise discharged. Upon (1) an event of default under any Senior
Indebtedness, or (2) any dissolution, winding up or liquidation of the Company,
any payment or distribution of assets of the Company, which the holder of this
Note would be entitled to receive but for the provisions hereof, shall be paid
by the liquidating trustee or agent or other person making such payment or
distribution directly to the holder of the Senior Indebtedness ratably according
to the aggregate amounts remaining unpaid on Senior Indebtedness after giving
effect to any concurrent payment or distribution to the holder of Senior
Indebtedness and until this Note is paid in full, the holder of this Note shall
be subrogated to the rights of the holders of the Senior Indebtedness (to the
extent of payments or distributions previously made to the holders of Senior
Indebtedness pursuant to this Section 2(a)) to receive payments or distributions
of assets of the Company applicable to the Senior Indebtedness.
(b) This Section 2 is not intended to impair, as between the
Company, its creditors (other than the holders of Senior Indebtedness) and the
holder of this Note, the unconditional and absolute obligation of the Company to
pay the principal of and interest on the Note or affect the relative rights of
the holder of this Note and the other creditors of the Company, other than the
holders of Senior Indebtedness. Nothing in this Note shall prevent the holder
of this Note from exercising all remedies otherwise permitted by applicable law
upon default under the Note, subject to the rights, if any, of the holders of
Senior Indebtedness in respect to cash, property or securities of the Company
received upon the exercise of any such remedy.
3. EVENTS OF DEFAULT. The Company's failure to pay (i) when due any
principal payment on the due date hereunder or (ii) any interest or other
payment required under the terms of this Note on the date due, and failure to
make such payment within five (5) business days of the Company's receipt of
Holder's written notice to Company of such failure to pay shall constitute an
Event of Default.
4. CONVERSION.
(a) In lieu of receiving cash payment for principal amounts and
accrued interest due under this Note, Holder shall have the right to convert
outstanding principal and accrued interest under this Note into Common Stock of
the Company at the conversion price per share equal to $1.00 (the "CONVERSION
PRICE") at any time on or prior to the Maturity Date.
(b) In addition to the conversion right provided in Section 4(a)
above, upon an Event of Default, in lieu of receiving cash payment for principal
amounts and accrued interest due under this Note, Holder shall have the right to
convert outstanding principal and accrued interest under this Note into Common
Stock of the Company at a conversion price per share equal to the lower of (i)
the Conversion Price or (ii) 65% of the average closing price of the Company's
Common Stock on the OTC Bulletin Board or Nasdaq SmallCap market, as applicable,
for the five (5) business days prior to the date of the Event of Default.
<PAGE>
Socket Communications, Inc.
Subordinated Convertible Promissory Note
Page 3
(c) Holder may exercise its conversion right by providing written
notice to the Company of Holder's intention to exercise its conversion right and
the amount of principal and accrued interest that it wishes to convert (the
"CONVERSION AMOUNT") at least ten (10) days prior to the date on which it wishes
to convert (the "CONVERSION DATE") (unless such notice is given pursuant to the
terms of Section 1(b) above, in which event notice shall comply with the terms
thereof). No fractional shares of Common Stock shall be issued upon conversion
of this Note. Promptly after the conversion of this Note, the Holder shall
surrender this Note, duly endorsed, at the principal office of Company. At its
expense, Company shall, as soon as practicable thereafter (or as otherwise noted
in the provisions above), issue and deliver to such Holder at such principal
office a certificate or certificates for the number of shares of such Common
Stock to which the Holder shall be entitled upon such conversion (bearing such
legends as are required by applicable state and federal securities laws in the
opinion of counsel to Company). In addition, unless this Note has been fully
converted, a new Note representing the principal amount that shall not have been
converted into Common Stock shall also be issued to Holder as soon as possible
thereafter. Upon conversion of this Note in full, Company shall be forever
released from all its obligations and liabilities under this Note including
principal, interest and any other amounts due and owing pursuant hereto. Any
notice from the Holder of an election to convert by the Company shall be
irrevocable.
(d) If at any time the number of authorized but unissued shares of
Common Stock shall not be sufficient to effect the conversion of the entire
outstanding principal amount and accrued interest under this Note, Company will
use its best efforts to take such corporate action as may be necessary, in the
opinion of its counsel, to increase its authorized but unissued shares of Common
Stock to such number of shares as shall be sufficient for such purposes.
5. REGISTRATION RIGHT.
(a) Following the Maturity Date, and within a reasonable amount of
time following the conversion by Holder of any outstanding principal and accrued
interest under this Note into Common Stock of the Company, the Company will use
reasonable efforts to (i) file a registration statement under the Securities Act
of 1933, as amended (the "SECURITIES ACT"), registering such shares for resale
to the public, (ii) have such registration statement declared effective by the
Securities and Exchange Commission, and (iii) register and qualify the
securities covered by such registration statement under the Blue Sky laws of
such jurisdictions as shall be reasonably requested by the Holder (provided that
the Company shall not be required in connection therewith or as a condition
thereto to qualify to do business or to file a general consent to service of
process in any such states or jurisdictions, unless the Company is already
subject to service in such jurisdiction and except as may be required by the
Securities Act), (iv) cause all securities registered pursuant hereunder to be
listed on each securities exchange on which similar securities issued by the
Company are listed, and (v) file updates to such registration statement as
necessary to keep it effective until the date that all remaining such shares may
be sold to the public without registration within a period of 90 days; PROVIDED
THAT, the Company may suspend such registration for up to two (2) periods of not
more than 90 days each in any 120 month period if necessary (X) to enable the
Company to update the registration statement or (Y) to undertake another sale of
securities.
(b) All Registration Expenses (as hereafter defined) incurred in
connection with any registration pursuant to this Section 5 shall be borne by
the Company. "Registration Expenses" shall mean all expenses incurred by the
Company in complying with this Section 5, including, without limitation, all
registration, qualification and filing fees, printing expenses, fees and
disbursements of counsel for the Company, the reasonable cost of one special
legal counsel to represent Holder in any such registration, and
<PAGE>
Socket Communications, Inc.
Subordinated Convertible Promissory Note
Page 4
Blue Sky fees and expenses. "Registration Expenses" shall not include (if
applicable) any underwriting discounts or selling commissions.
(c) INDEMNIFICATION.
(i) The Company will indemnify the Holder, each of its
officers and directors and partners, and each person controlling such Holder
within the meaning of Section 15 of the Securities Act, with respect to which
registration, qualification or compliance has been effected pursuant to this
Section 5, against all expenses, claims, losses, damages or liabilities (or
actions in respect thereof), including any of the foregoing incurred in
settlement of any litigation, commenced or threatened, arising out of or based
on any untrue statement (or alleged untrue statement) of a material fact
contained in any registration statement, prospectus, preliminary prospectus,
offering circular or other document or any amendment or supplement thereto
incident to any such registration, qualification or compliance, or based on any
omission (or alleged omission) to state therein a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances in which they were made, not misleading, or any violation or any
alleged violation by the Company of any rule or regulation promulgated under the
Securities Act or the Exchange Act or any state securities law applicable to the
Company in connection with any such registration, qualification or compliance,
and the Company will reimburse each such Holder, each of its officers and
directors, and each person controlling such Holder, for any legal and any other
expenses reasonably incurred in connection with investigating, preparing or
defending any such claim, loss, damage, liability or action, as such expenses
are incurred, provided that the Company will not be liable in any such case to
the extent that any such claim, loss, damage, liability or expense arises out of
or is based on any untrue statement or omission or alleged untrue statement or
omission, made in reliance upon and in conformity with written information
furnished to the Company by an instrument duly executed by such Holder or
controlling person and stated to be specifically for use therein.
(ii) The Holder will indemnify the Company, each of its
directors and officers, and each person who controls the Company within the
meaning of Section 15 of the Securities Act against all claims, losses, damages
and liabilities (or actions in respect thereof) arising out of or based on any
untrue statement (or alleged untrue statement) of a material fact contained in
any such registration statement, prospectus, offering circular or other
document, or any omission (or alleged omission) to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, and will reimburse the Company, such directors, officers or control
persons for any legal or any other expenses reasonably incurred in connection
with investigating or defending any such claim, loss, damage, liability or
action, as such expenses are incurred, in each case to the extent, but only to
the extent, that such untrue statement (or alleged untrue statement) or omission
(or alleged omission) is made in such registration statement, prospectus,
offering circular or other document in reliance upon and in conformity with
written information furnished to the Company by an instrument duly executed by
such Holder and stated to be specifically for use therein.
6. RIGHT OF PARTICIPATION. Upon the first (and only the first) offering
(or series of related offerings in any 90-day period) by the Company subsequent
to the date hereof of any shares of, or securities convertible into or
exercisable for any shares of, any class of its capital stock ("SECURITIES"),
the Company shall offer to (i) the Holder; (ii) Cetronic AB ("CETRONIC") and
(iii) each other affiliate of Cetronic that holds a Subordinated Convertible
Promissory Note issued by he Company (collectively, the "AFFILIATED HOLDERS")
the option to purchase up to an aggregate of $2,000,000 worth of the offered
Securities, not to exceed 50% of the offering (the "AFFILIATED HOLDER MAXIMUM"),
in accordance with the following provisions.
<PAGE>
Socket Communications, Inc.
Subordinated Convertible Promissory Note
Page 5
(a) The Company shall deliver a notice to Cetronic stating (i) its
bona fide intention to offer such Securities, (ii) the number of such Securities
to be offered, (iii) the price, if any, for which it proposes to offer such
Securities, and (iv) the terms of such offer. Cetronic will distribute this
notice to the other Affiliated Holders, and the Affiliated Holders will
apportion the Affiliated Holder Maximum amongst themselves as they see fit.
(b) Within fifteen (15) calendar days after receipt of the notice,
Cetronic will notify the Company of the portion of the Affiliated Holder Maximum
that the Affiliated Holders wish to purchase, along with a detailed list of the
appointment of such Affiliated Holder maximum amongst the Affiliated Holders.
(c) The right of participation in this Section 6 shall not be
applicable (i) to the issuance or sale of shares of capital stock (or options
therefor) to employees, officers, directors or consultants for the primary
purpose of soliciting or retaining their services, (ii) to the issuance or sale
of the Company's securities to leasing entities or financial institutions in
connection with commercial leasing or borrowing transactions, or (iii) to
conversions of convertible securities.
7. REPRESENTATIONS AND WARRANTIES OF HOLDER. By its acceptance hereof,
Holder represents and warrants to Company that:
(a) Holder has been advised that this Note and the Common Stock of
the Company issuable upon conversion of the Note (with the Note and such Common
Stock being hereinafter collectively referred to as the "SECURITIES") have not
been registered under the Securities Act, or any state securities laws and,
therefore, cannot be resold unless such Securities are registered under the
Securities Act and applicable state securities laws or unless an exemption from
such registration requirements is available. Holder has not been formed solely
for the purpose of making this investment and is acquiring the Securities for
its own account for investment, not as a nominee or agent, and not with a view
to, or for resale in connection with, the distribution thereof. Holder has such
knowledge and experience in financial and business matters that such Holder is
capable of evaluating the merits and risks of such investment, is able to incur
a complete loss of such investment and is able to bear the economic risk of such
investment for an indefinite period of time.
(b) Holder acknowledges that Company has given Holder access to all
documents and other information required for Holder to make an informed decision
with respect to the acceptance of the Securities. In this regard, Holder
acknowledges that it has received and reviewed, among other things, the
following documents filed by the Company with the Securities and Exchange
Commission: (i) the Company's Quarterly Report on Form 10-QSB for the quarter
ended September 30, 1996 and (ii) the Company's Annual Report on Form 10-KSB for
the year ended December 31, 1995.
(c) At the time of both the offer and execution of the Note, the
holder was neither a United States citizen nor a person in the United States.
(d) During the term of the Note, the Holder does not intend to sell
any of the Company Common Stock issuable upon conversion of the Note to any
United States citizen or person in the United States.
8. ATTORNEYS'S FEES. If the indebtedness represented by this Note or any
part thereof is collected in bankruptcy, receivership or other judicial
proceedings or if this Note is placed in the hands of
<PAGE>
Socket Communications, Inc.
Subordinated Convertible Promissory Note
Page 6
attorneys for collection after default, Company agrees to pay, in addition to
the principal and interest payable hereunder, reasonable attorneys' fees and
costs incurred by Holder.
9. NOTICES. Except as otherwise provided herein, all notices, requests,
demands, consents, instructions or other communications to or upon the Company
or Holder hereunder shall be by telecopy or in writing and telecopied, mailed or
delivered to each party at telecopier number or its address set forth below (or
to such other telecopy number or address as the recipient of any notice shall
have notified the other in writing). All such notices and communications shall
be effective (a) when sent by Federal Express or other overnight service of
recognized standing, on the business day following the deposit with such service
(if sent to an address in the same country as the sender) or on the third
business day following the deposit with such service (if sent to an address in a
different country from the sender; (b) when mailed, by registered or certified
mail, first class postage prepaid and addressed as aforesaid through the United
States Postal Service, upon receipt; (c) when delivered by hand, upon delivery;
and (d) when telecopied, upon confirmation of receipt.
HOLDER: _____________________________
_____________________________
_____________________________
_____________________________
COMPANY: Socket Communications, Inc.
37400 Central Court
Newark, CA 94560
Attention: Chief Financial Officer
(415) 744-2700 (telephone)
(415) 744-2727 (telecopy)
10. ACCELERATION. This Note shall become immediately due and payable (a)
upon an Event of Default, (b) if the Company commences any proceeding in
bankruptcy or for dissolution, liquidation, winding-up, composition or other
relief under state or federal bankruptcy laws, or (c) such proceedings are
commenced against the Company, or a receiver or trustee is appointed for the
Company or a substantial part of its property, and such proceeding or
appointment is not dismissed or discharged within 60 days after its
commencement.
11. WAIVERS. Company hereby waives presentment, demand for performance,
notice of non-performance, protest, notice of protest and notice of dishonor.
No delay on the part of Holder in exercising any right hereunder shall operate
as a waiver of such right or any other right.
12. PAYMENT. Payment shall be made in lawful tender of the United States.
13. USURY. In the event any interest is paid on this Note which is deemed
to be in excess of the then legal maximum rate, then that portion of the
interest payment representing an amount in excess of the then legal maximum rate
shall be deemed a payment of principal and applied against the principal of this
Note.
<PAGE>
Socket Communications, Inc.
Subordinated Convertible Promissory Note
Page 7
14. GOVERNING LAW. This Note and all actions arising out of or in
connection with this Note shall be governed by and construed in accordance with
the laws of the State of California, without regard to the conflicts of law
provisions of the State of California or of any other state or country.
15. SUCCESSORS AND ASSIGNS.
(a) The rights and obligations of the Company and the Holder of this
Note shall be binding upon and benefit the successors, assigns, heirs,
administrators and transferees of the parties.
(b) Holder shall not transfer this Note without the prior written
consent of Company except that Holder may transfer the Note without such prior
written consent to a collection agency following an Event of Default.
(c) Neither this Note nor any of the rights, interests or
obligations hereunder may be assigned, by operation of law or otherwise, in
whole or in part, by Company without the prior written consent of the Holder
except in connection with an assignment in whole to a successor corporation to
Company, provided that such successor corporation acquires all or substantially
all of Company's property and assets and Holder's rights hereunder are not
impaired.
SOCKET COMMUNICATIONS, INC.
---------------------------------
Signature
Name:
---------------------------
Title:
--------------------------
<PAGE>
EXHIBIT F
THE SECURITIES REPRESENTED BY THIS INSTRUMENT HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR QUALIFIED UNDER APPLICABLE STATE
SECURITIES LAWS AND HAVE BEEN TAKEN FOR INVESTMENT PURPOSES ONLY AND NOT WITH
A VIEW TO OR FOR SALE IN CONNECTION WITH ANY DISTRIBUTION THEREOF. THE
SECURITIES MAY NOT BE SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH
REGISTRATION AND QUALIFICATION WITHOUT, EXCEPT UNDER CERTAIN SPECIFIED
LIMITED CIRCUMSTANCES, AN OPINION OF COUNSEL FOR THE HOLDER, CONCURRED IN BY
COUNSEL FOR THE COMPANY, THAT SUCH REGISTRATION AND QUALIFICATION ARE NOT
REQUIRED.
SOCKET COMMUNICATIONS, INC.
AMENDED AND RESTATED
SUBORDINATED CONVERTIBLE PROMISSORY NOTED
$___________________ NEWARK, CALIFORNIA
FEBRUARY 14, 1997
SOCKET COMMUNICATIONS, INC., a Delaware corporation (the "COMPANY"),
for value received, hereby promises to pay to the order of
_____________________________ or holder ("HOLDER") in lawful money of the
United States at the address of Holder set forth below, the principal amount
of (WRITTEN OUT) $____________, together with simple interest at the rate of
eight percent (8%) per annum (calculated on the basis of actual days elapsed
and a year of 365 days). Accrued interest shall be payable in cash only at
the time the Company pays any portion of the principal amount of this Note.
If this Note is converted pursuant to Section 4 hereof, accrued interest may
be converted as set forth therein; any accrued interest that is not so
converted shall be payable in cash.
This Note was originally executed on February 14, 1997. This Note was
amended and restated as of August 14, 1997 to, among other things, extend the
Maturity Date (as defined in Section 1(a) hereof) (which amendment and
restatement shall not be effective until the execution of that certain
Agreement and Option to Invest by and between the Company and Holder). The
following is a statement of the rights of Holder and the conditions to which
this Note is subject, and to which the Holder hereof, by the acceptance of
this Note, agrees.
1. PAYMENTS; PREPAYMENTS
(a) All principal, interest and other amounts due hereunder shall
be due and payable on the earlier of (i) August 14, 1998 (the "MATURITY
DATE") and (ii) the day on which this Note becomes immediately due and
payable pursuant to Section 10 hereof.
(b) This Note may be prepaid, in whole or in part, from time to
time ten (10) business days after Holder receives written notice of such
prepayment from the Company; Holder shall then have until the end of such ten
(10) business day period to notify the Company in writing that it wishes to
convert all or part of the outstanding principal and accrued interest under
this Note into Common Stock pursuant to Section 4 below. Prepayments shall
be (i) reduced by any amounts that Holder desires to so convert into Common
Stock and then (ii) applied first to outstanding interest, and then to
principal.
(c) Upon payment in full of all principal and interest payable
hereunder, this Note shall be surrendered to Company for cancellation.
<PAGE>
Socket Communications, Inc.
Amended and Restated Subordinated
Convertible Promissory Note
Page 2
2. SUBORDINATION
(a) "Senior Indebtedness" means (a) the principal of and premium,
if any, and interest on indebtedness of the Company incurred pursuant to the
Promissory Note and Loan Agreement, each dated as of July 5, 1995, between
the Company and CivicBank of Commerce; and (b) all present and future
indebtedness, obligations, liabilities, claims, rights and demands of any
kind which may be now or hereafter owing from the Company to World Trade in
connection with that certain Note in the amount of $500,000 (or such lesser
amount as the Company and World Trade may finally agree) issued by the
Company in favor of World Trade and a related Commercial Security Agreement
and Commercial Pledge Agreement between the Company and World Trade,
including, without limitation, all principal, all interest, all costs and
attorneys' fees, all sums paid for the purpose of protecting World Trade's
rights in security (such as paying for insurance on collateral if the owner
fails to do so), and all other obligations of the Company to World Trade,
secured or unsecured, of any nature whatsoever. The Company agrees and the
holder of this Note, by acceptance thereof, agrees, expressly for the benefit
of the holder of the Senior Indebtedness, that, except as otherwise provided
herein, upon (i) an event of default under the Senior Indebtedness, or (ii)
any dissolution, winding up, or liquidation of the Company, whether or not in
bankruptcy, insolvency or receivership proceedings, the Company shall not
pay, and holder of such Note shall not be entitled to receive, any amount in
respect of the principal and interest of such Note unless and until the
Senior Indebtedness, shall have been paid or otherwise discharged. Upon (1)
an event of default under the Senior Indebtedness, or (2) any dissolution,
winding up or liquidation of the Company, any payment or distribution of
assets of the Company, which the holder of this Note would be entitled to
receive but for the provisions hereof, shall be paid by the liquidating
trustee or agent or other person making such payment or distribution directly
to the holders of the Senior Indebtedness ratably according to the aggregate
amounts remaining unpaid on the Senior Indebtedness after giving effect to
any concurrent payment or distribution to the holders of the Senior
Indebtedness. Subject to the payment in full of the Senior Indebtedness and
until this Note is paid in full, the holder of this Note shall be subrogated
to the rights of the holders of the Senior Indebtedness (to the extent of
payments or distributions previously made to the holders of the Senior
Indebtedness pursuant to this Section 2(a)) to receive payments or
distributions of assets of the Company applicable to the Senior Indebtedness.
(b) This Section 2 is not intended to impair, as between the
Company, its creditors (other than the holders of the Senior Indebtedness)
and the holder of this Note, the unconditional and absolute obligation of the
Company to pay the principal of and interest on the Note or affect the
relative rights of the holder of this Note and the other creditors of the
Company, other than the holders of the Senior Indebtedness. Nothing in this
Note shall prevent the holder of this Note from exercising all remedies
otherwise permitted by applicable law upon default under the Note, subject to
the rights, if any, of the holders of the Senior Indebtedness in respect to
cash, property or securities of the Company received upon the exercise of any
such remedy.
3. EVENTS OF DEFAULT
The Company's failure to pay (i) when due any principal payment on
the due date hereunder or (ii) any interest or other payment required under
the terms of this Note on the date due, and failure to make such payment
within five (5) business days of Company's receipt of Holder's written notice
to Company of such failure to pay, shall constitute an Event of Default.
<PAGE>
Socket Communications, Inc.
Amended and Restated Subordinated
Convertible Promissory Note
Page 3
4. CONVERSION
(a) In lieu of receiving cash payment for principal amounts and
accrued interest due under this Note, Holder shall have the right to convert
outstanding principal and accrued interest under this Note into Common Stock
of the Company at a conversion price per share equal to $0.50 (the
"CONVERSION PRICE") at any time on or prior to the Maturity Date, subject to
the provisions of Section 2 of that certain Agreement and Option to Invest of
even date herewith between the Company and Holder.
(b) In addition to the conversion right provided in Section 4(a)
above, upon an Event of Default, in lieu of receiving cash payment for
principal amounts and accrued interest due under this Note, Holder shall have
the right to convert outstanding principal and accrued interest under this
Note into Common Stock of the Company at a conversion price per share equal
to the lower of (i) the Conversion Price or (ii) 75% of the average closing
price of the Company's Common Stock on the OTC Bulletin Board or Nasdaq Small
Cap Market, as applicable, for five (5) business days prior to the date of
the Event of Default.
(c) Holder may exercise its conversion right by providing written
notice to the Company of Holder's intention to exercise its conversion right
and the amount of principal and accrued interest that it wishes to convert
(the "CONVERSION AMOUNT") at least ten (10) days prior to the date on which
it wishes to convert (the "CONVERSION DATE") (unless such notice is given
pursuant to the terms of Section 1(b) above, in which event notice shall
comply with the terms thereof). No fractional shares of Common Stock shall
be issued upon conversion of this Note. Promptly after the conversion of
this Note, the Holder shall surrender this Note, duly endorsed, at the
principal office of Company. At this expense, Company shall, as soon as
practicable thereafter (or as otherwise noted in the provisions above), issue
and deliver to such Holder at such principal office a certificate or
certificates for the number of shares of such Common Stock to which the
Holder shall be entitled upon such conversion (bearing such legends as are
required by applicable state and federal securities laws in the opinion of
counsel to Company). In addition, unless this Note has been fully converted,
a new Note representing the principal amount that shall not have been
converted into Common Stock shall also be issued to Holder as soon as
possible thereafter. Upon conversion of this Note in full, Company shall be
forever released from all its obligations and liabilities under this Note
including principal, interest and any other amounts due and owing pursuant
hereto. Any notice from the Holder of an election to convert by the Company
shall be irrevocable.
(d) If at any time the number of authorized but unissued shares
of Common Stock shall not be sufficient to effect the conversion of the
entire outstanding principal amount and accrued interest under this Note,
Company will use its best efforts to take such corporate action as may be
necessary, in the opinion of its counsel, to increase its authorized but
unissued shares of common Stock to such number of shares as shall be
sufficient for such purposes.
5. REGISTRATION RIGHT.
(a) Following the Maturity Date, and within a reasonable amount
of time following the conversion by Holder of any outstanding principal and
accrued interest under this Note into Common Stock of the Company, the
Company will use reasonable efforts to (i) file a registration statement
under the Securities Act of 1933, as amended (the "SECURITIES ACT")
registering such shares for resale to the public, (ii) have such registration
statement declared effective by the Securities and Exchange Commission, (iii)
register and qualify the securities covered by such registration statement
under the Blue Sky laws of such
<PAGE>
Socket Communications, Inc.
Amended and Restated Subordinated
Convertible Promissory Note
Page 4
jurisdictions as shall be reasonably requested by the Holder (provided that
the Company shall not be required in connection therewith or as a condition
thereto to qualify to do business or to file a general consent to service of
process in any such states or jurisdictions, unless the Company is already
subject to service in such jurisdiction and except as may be required by the
Securities Act), (iv) cause all securities registered pursuant hereunder to
be listed on each securities exchange on which similar securities issued by
the Company are then listed, and (v) file updates to such registration
statement as necessary to keep it effective until the date that all remaining
such shares may be sold to the public without registration within a period of
ninety (90) days; PROVIDED THAT, the Company may suspend such registration
for up to two periods of not more than ninety (90) days each in any 12-month
period if necessary (x) to enable the Company to update the registration
statement or (y) to undertake another sale of securities.
(b) All Registration Expenses (as hereafter defined) incurred in
connection with any registration pursuant to this Section 5 shall be borne by
the Company. "Registration Expenses" shall mean all expenses incurred by the
Company in complying with this Section 5, including, without limitation, all
registration, qualification and filing fees, printing expenses, fees and
disbursements of such registration, and blue sky fees and expenses.
"Registration Expenses" shall not include (if applicable) any underwriting
discounts or selling commissions.
(c) INDEMNIFICATION.
(i) The Company will indemnify the Holder, each of its
officers and directors and partners, and each person controlling such Holder
within the meaning of Section 15 of the Securities Act, with respect to which
registration, qualification or compliance has been effected pursuant to this
Section 5, against all expenses, claims, losses, damages or liabilities (or
actions in respect thereof), including any of the foregoing incurred in
settlement of any litigation, commenced or threatened, arising out of or
based on any untrue statement (or alleged untrue statement) of a material
fact contained in any registration statement, prospectus, preliminary
prospectus, offering circular or other document, or any amendment or
supplement thereto, incident to any such registration, qualification or
compliance, or based on any omission (or alleged omission) to state therein a
material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances in which they were made,
not misleading, or any violation or any alleged violation by the Company of
any rule or regulation promulgated under the Securities Act or the Exchange
Act or any state securities law applicable to the Company in connection with
any such registration, qualification or compliance, and the Company will
reimburse each such Holder, each of its officers and directors, and each
person controlling such Holder, for any legal and any other expenses
reasonably incurred in connection with investigating, preparing or defending
any such claim, loss, damage, liability or action, as such expenses are
incurred, provided that the Company will not be liable in any such case to
the extent that any such claim, loss, damage, liability or expense arises out
of or is based on any untrue statement or omission or alleged untrue
statement or omission, made in reliance upon and in conformity with written
information furnished to the Company by an instrument duly executed by such
Holder or controlling person and stated to be specifically for use therein.
(ii) The Holder will indemnify the Company, each of its
directors and officers, and each person who controls the Company within the
meaning of Section 15 of the Securities Act against all claims, losses,
damages and liabilities (or actions in respect thereof) arising out of or
based on any untrue statement (or alleged untrue statement) of a material
fact contained in any such registration statement, prospectus, offering
circular or other document, or any omission (or alleged omission) to state
therein a
<PAGE>
Socket Communications, Inc.
Amended and Restated Subordinated
Convertible Promissory Note
Page 5
material fact required to be stated therein or necessary to make the
statements therein not misleading, and will reimburse the Company, such
directors, officers or control persons for any legal or any other expenses
reasonably incurred in connection with investigating or defending any such
claim, loss, damage, liability or action, as such expenses are incurred, in
each case to the extent, but only to the extent, that such untrue statement
(or alleged untrue statement) or omission (or alleged omission) is made in
such registration statement, prospectus, offering circular or other document
in reliance upon and in conformity with written information furnished to the
Company by an instrument duly executed by such Holder and stated to be
specifically for use therein.
6. RIGHT OF PARTICIPATION. Upon the first (and only the first)
offering (or series of related offerings in any 90-day period) by the Company
subsequent to the date hereof of any shares of, or securities convertible
into or exercisable for any shares of, any class of its capital stock
("SECURITIES"), the Company shall offer to the Holder and each of its
affiliates that holds a Subordinated Convertible Promissory Note issued by
the Company (collectively, the "AFFILIATED HOLDERS") the option to purchase
up to an aggregate of Two Million Dollars ($2,000,000) worth of the offered
Securities not to exceed 50% of the offering (the "AFFILIATED HOLDER
MAXIMUM"), in accordance with the following provisions:
(a) The Company shall deliver a notice to the Holder stating (i)
its bona fide intention to offer such Securities, (ii) the number of such
Securities to be offered, (iii) the price, if any, for which it proposes to
offer such Securities, and (iv) the terms of such offer. The Holder will
distribute this notice to the other Affiliated Holders, and the Affiliated
Holders will apportion the Affiliated Holder Maximum amongst themselves as
they see fit.
(b) Within fifteen (15) calendar days after receipt of the
Notice, the Holder will notify the Company of the portion of the Affiliated
Holder Maximum that the Affiliated Holders wish to purchase, along with a
detailed list of the apportionment of such Affiliated Holder Maximum amongst
the Affiliated Holders.
(c) The right of participation in this Section 6 shall not be
applicable (i) to the issuance or sale of shares of capital stock (or options
therefor) to employees, officers, directors or consultants for the primary
purpose of soliciting or retaining their services, (ii) to the issuance or
sale of the Company's securities to leasing entities or financial
institutions in connection with commercial leasing or borrowing transactions,
or (iii) to conversions of convertible securities.
7. REPRESENTATIONS AND WARRANTIES OF HOLDER. By its acceptance
hereof, Holder represents and warrants to Company that:
(a) Holder has been advised and acknowledges: (i) that this Note
and the Common Stock of the Company issuable upon conversion of the Note
(with the Note and such Common Stock being hereinafter referred to as the
"SECURITIES") have not been, and when issued, will not be registered under
the Securities Act, the securities laws of any state of the United States or
the securities laws of any other country; (ii) that in issuing and selling
the Securities to Holder pursuant hereto, the Company is relying upon the
"safe harbor" provided by Regulations S and/or on Section 4(2) under the
Securities Act; (iii) that it is a condition to the availability of the
Regulation S safe harbor that the Securities not be offered or sold in the
United States or to a U.S. Person until the expiration of a period of forty
(40) days following the issuance of such Securities; (iv) that,
notwithstanding the foregoing, prior to the expiration of forty (40) days
after the issuance
<PAGE>
Socket Communications, Inc.
Amended and Restated Subordinated
Convertible Promissory Note
Page 6
of such Securities (the "RESTRICTED PERIOD"), the Securities may be offered
and sold by the holder thereof solely either: (A) if the offer or sale is
within the United States or to or for the Account of a U.S. Person (as such
terms are defined in Regulation S), the securities are offered and sold
pursuant to an effective registration statement or pursuant to Rule 144 under
the Securities Act or pursuant to an exemption from the registration
requirements of the Securities Act; or (B) the offer and sale is outside the
United States and to other than a U.S. Person. The foregoing restrictions are
binding upon subsequent transferees of the Securities, except for transferees
pursuant to an effective registration statement. After the Restricted
Period, the Securities may be offered or sold within the United States or to
or for the account of a U.S. Person only pursuant to applicable securities
laws.
(b) As used herein, the term "United States" means and includes
the United States of America, its territories and possessions, any State of
the United States, and the District of Columbia, and the term "U.S. Person"
(as defined in Regulation S) means: (i) a natural person (regardless of
citizenship) resident in the United States; (ii) any partnership or
corporation organized or incorporated under the laws of the United States;
(iii) any estate or trust of which any executor, administrator or trustee is
a U.S. Person; (iv) any agency or branch of a foreign entity located in the
United States; (v) any nondiscretionary account or similar account (other
than an estate or trust) held by a dealer or other fiduciary for the benefit
or account of a U.S. Person (whether or not the dealer or other fiduciary is
a U.S. Person); (vi) any discretionary account or similar account (other than
an estate or trust) held by a dealer or other fiduciary organized,
incorporated and (if an individual) resident in the United States; and (vii)
a corporation or partnership organized under the laws of any jurisdiction
other than the United States by a U.S. Person principally for the purpose of
investing in securities that have not been registered under the Securities
Act, unless organized or incorporated and owned entirely by accredited
investors (as defined in Rule 501(a) under the Securities Act) who are not
natural persons, estates or trusts.
(c) Holder agrees that with respect to the Securities until the
expiration of the Restricted Period: (i) Holder, its agents or
representatives have not and will not solicit offers to buy, offer for sale
or sell any of the Securities, or any beneficial interest therein in the
United States or to or for the account of a U.S. Person during the Restricted
Period; and (ii) that, notwithstanding the foregoing, prior to the expiration
of the Restricted Period, the Securities may be offered and sold by the
holder thereof either: (A) if the offer or sale is within the United States
or to or for the account of a U.S. Person (as such terms are defined in
Regulation S), the securities are offered and sold pursuant to an effective
registration statement or pursuant to Rule 144 under the Securities Act or
pursuant to an exemption from the registration requirements of the Securities
Act; or (B) the offer and sale is outside the United States and to other than
a U.S. person. The foregoing restrictions are binding upon subsequent
transferees of the Securities, except for transferees pursuant to an
effective registration statement. Holder agrees that after the Restricted
Period, the Securities may be offered or sold within the United States or to
or for the account of a U.S. Person only pursuant to applicable securities
laws.
(d) Holder has not engaged, nor is it aware that any party has
engaged, and Holder will not engage or cause any third party to engage in any
directed selling efforts (as such term is defined in Regulation S) in the
United States with respect to the Securities.
(e) Holder (i) is domiciled and has its principal place of business
outside the United States, (ii) certifies it is not a U.S. Person and is not
acquiring the securities for the account or benefit of any
<PAGE>
Socket Communications, Inc.
Amended and Restated Subordinated
Convertible Promissory Note
Page 7
U.S. Person, and (iii) any persons acting on Holder's behalf in connection
therewith will be located outside the United States.
(f) Holder is acquiring the Securities either: (i) for its own
account; or (ii) for the account and benefit of clients of whom none is a
U.S. Person and for whom Holder has, and for the entire Restricted Period
will continue to have, full investment discretion with respect to the
purchase, holding and disposition of the Securities.
(g) Holder is not a "distributor" (as defined in Regulation S) or
a "dealer" (as defined in the Securities Act).
(h) By reason of Holder's business or financial experience, or
that of the Holder's professional advisor, Holder has the capacity to protect
Holder's own interests in connection with the acquisition of the Securities
and has the ability to bear the economic risk (including the risk of total
loss) of Holder's investment.
(i) Holder further covenants that Holder will not make any sale,
transfer or other disposition of the Securities in violation of the
Securities Act, the Securities and Exchange Act of 1934, as amended (the
"EXCHANGE ACT"), or the rules of the Securities and Exchange Commission
promulgated under the Securities Act or the Exchange Act.
(j) Holder covenants that Holder will sell, transfer or otherwise
dispose of the Securities only in a manner consistent with such Holder's
representations and covenants set forth in this Section 7. In connection
therewith, Holder acknowledges that, upon issuance of the shares of Common
Stock of the Company upon conversion of this Note, the Company shall make a
notation in its stock books regarding the restrictions on transfer set forth
in this Section 7 and shall transfer such shares on the books of the Company
only to the extent not inconsistent therewith.
(k) Holder acknowledges that Company has given Holder access to
all documents and other information required for Holder to make an informed
decision with respect to the acceptance of the Securities. In this regard,
Holder acknowledges that it has received and reviewed, among other things,
the following documents filed by the Company with the Securities and Exchange
Commission: (i) the Company's Quarterly Report on Form 10-QSB for the
quarters ended March 31, 1997 and June 30, 1997 and (ii) the Company's Annual
Report on Form 10-KSB for the year ended December 31, 1996.
8. ATTORNEYS' FEES. If the indebtedness represented by this Note or
any part thereof is collected in bankruptcy, receivership or other judicial
proceedings or if this Note is placed in the hands of attorneys for
collection after default, Company agrees to pay, in addition to the principal
and interest payable hereunder, reasonable attorneys' fees and costs incurred
by Holder.
9. NOTICES. Except as otherwise provided herein, all notices
requests, demands, consents, instructions or other communications to or upon
the Company or Holder hereunder shall be by telecopy or in writing and
telecopied, mailed or delivered to each party at telecopier number or its
address set forth below (or to such other telecopy number or address as the
recipient of any notice shall have notified the other in writing). All such
notices and communications shall be effective (a) when sent by Federal
Express or other overnight service of recognized standing, on the business
day following the deposit with such service (if sent
<PAGE>
Socket Communications, Inc.
Amended and Restated Subordinated
Convertible Promissory Note
Page 8
to an address in the same country as the sender) or on the third business day
following the deposit with such service (if sent to an address in a different
country from the sender); (b) when mailed, by registered or certified mail,
first class postage prepaid and addressed as aforesaid through the United
States Postal Service, upon receipt; (c) when delivered by hand, upon
delivery; and (d) when telecopied, upon confirmation of receipt.
HOLDER: (first line address)
(2nd line address)
(3rd line address)
(4th line address)
COMPANY: Socket Communications, Inc.
37400 Central Court
Newark, CA 94560
Attention: Chief Financial Officer
(415) 744-2700 (telephone)
(415) 744-2727 (telecopy)
10. ACCELERATION: This Note shall become immediately due and payable
(a) upon an Event of Default, (b) if the Company commences any proceeding in
bankruptcy or for dissolution, liquidation, winding-up, composition or other
relief under state or federal bankruptcy laws, or (c) if such proceedings are
commenced against the Company, or a receiver or trustee is appointed for the
Company or a substantial part of its property, and such proceeding or
appointment is not dismissed or discharged within sixty (60) days after its
commencement.
11. WAIVERS. Company hereby waives presentment, demand for
performance, notice of non-performance, protest, notice of protest and notice
of dishonor. No delay on the part of Holder in exercising any right hereunder
shall operate as a waiver of such right or any other right.
12. PAYMENT. Payment shall be made in lawful tender of the United
States.
13. USURY. In the event any interest is paid on this Note which is
deemed to be in excess of the then legal maximum rate, then that portion of
the interest payment representing an amount in excess of the then legal
maximum rate shall be deemed a payment of principal and applied against the
principal of this Note.
14. GOVERNING LAW. This Note and all actions arising out of or in
connection with this Note shall be governed by and construed in accordance
with the laws of the State of California, without regard to the conflicts of
law provisions of the State of California or of any other state or country.
15. SUCCESSORS AND ASSIGNS.
(a) The rights and obligations of the Company and the Holder of
this Note shall be binding upon and benefit the successors, assigns, heirs,
administrators and transferees of the parties.
<PAGE>
Socket Communications, Inc.
Amended and Restated Subordinated
Convertible Promissory Note
Page 9
(b) Holder shall not transfer this Note without the prior written
consent of Company, except that Holder may transfer the Note without such
prior written consent to a collection agency following an Event of Default.
(c) Neither this Note nor any of the rights, interests or
obligations hereunder may be assigned, by operation of law or otherwise, in
whole or in part, by Company without the prior written consent of the Holder
except in connection with an assignment in whole to a successor corporation
to Company, provided that such successor corporation acquires all or
substantially all of Company's property and assets and Holder's rights
hereunder are not impaired.
SOCKET COMMUNICATIONS, INC.
By: ________________________________
Name: ______________________________
Title: _____________________________
Agreed and Accepted:
HOLDER
By: ________________________________
Name: ______________________________
Title: _____________________________
<PAGE>
EXHIBIT G
AGREEMENT AND OPTION TO INVEST
This Agreement and Option to Invest (this "AGREEMENT") is made as of the
___ day of September, 1997 by and among Socket Communications, Inc., a Delaware
corporation ("SOCKET") and the investors listed on Schedule A hereto (the
"INVESTORS").
WHEREAS, each of the Investors made an investment in Socket pursuant to a
Convertible Subordinated Promissory Note dated February 14, 1997 in the
principal amount set forth opposite such Investor's name on Schedule A hereto
(the "PRIOR INVESTMENT");
WHEREAS, in connection with this Agreement, Socket and each of the
Investors have agreed to amend and restate the prior Convertible Subordinated
Promissory Note to, among other things, extend the term of such note to August
14, 1998 and reduce the conversion price from $1.00 to $0.50 per share of Socket
Common Stock (as amended and restated, the "AMENDED AND RESTATED NOTE"); and
WHEREAS, if Socket achieves certain milestones by October 31, 1997 as set
forth on Exhibit A (the "MILESTONES"), each of the Investors desires to make an
additional investment in at least the same amount as the Prior Investment
pursuant to a new Convertible Subordinated Promissory Note on substantially the
terms set forth on the Term Sheet attached hereto as Exhibit B (the "ADDITIONAL
INVESTMENT TERMS").
NOW, THEREFORE, in consideration of the mutual representations, warranties,
covenants, and agreements set forth herein, the parties hereto hereby agree as
follows:
Section 1. AGREEMENT TO INVEST.
(a) Each of the Investors, severally and not jointly, agrees that,
in the event that Socket achieves the Milestones by October 31, 1997 (the "FINAL
DATE"), such Investor shall make an additional investment (the "ADDITIONAL
INVESTMENT") in Socket in at least the amount of the Prior Investment upon the
terms set forth in the Additional Investment Terms. In the event that the
Milestones are achieved as aforesaid on or prior to the Final Date, Socket shall
promptly deliver to each Investor written notice (the "MILESTONE NOTICE")
stating that such Milestones have been achieved. Within five (5) business days
following receipt of the Milestone Notice, (i) each such Investor shall make the
Additional Investment by wire transfer or certified check to Socket in
immediately available funds; and (ii) Socket shall deliver a signed Convertible
Subordinated Promissory Note that incorporates the Additional Investment Terms
(and that shall be in substantially similar form as the Amended and Restated
Note).
(b) In the event that an Investor does not make the Additional
Investment upon the completion of the Milestones as aforesaid, the conversion
price of the Amended and Restated Note of such Investor shall thereupon
immediately, and without taking any further action on the part of Socket or such
Investor, revert to a conversion price of $1.00 per share of socket Common
Stock. Each of the Investors agrees that any conversion of the Amended and
Restated Note at a conversion price of $0.50 per share of Socket Common Stock
prior to the Final Date shall be effective only upon the making of the
Additional Investment, and that any such conversion prior to the Final Date that
is not accompanied or preceded by an Additional Investment shall be at a
conversion price of $1.00 per share of Socket Common Stock.
Section 2. OPTION TO INVEST. Notwithstanding whether Socket achieves the
Milestones by or before the Final Date, each Investor shall have an option to
make an additional investment in any amount not to exceed $500,000 in the
aggregate among all such Investors on the Additional Investment Terms. Such
option shall expire on the fifth business day following the Final Date. Such
option shall be exercised by
<PAGE>
Agreement and Option to Invest
Page 2
written notice to Socket, which notice shall state the amount of the
additional investment that such Investor intends to make and shall be in the
form attached hereto as Exhibit C.
Section 3. REPRESENTATIONS AND WARRANTIES OF THE INVESTORS. Each of the
Investors, severally but not jointly, hereby represents and warrants to the
Company as follows:
(a) Investor has been advised and acknowledges: (i) that the new
Convertible Subordinated Promissory Noted (the "NEW NOTE") to be issued to
Investor under this Agreement, Common Stock of the Company issuable upon
conversion of the New Note (with this Agreement, the option granted hereunder,
the New Note and such Common Stock being hereinafter referred to as the
"SECURITIES") have not been, and when issued, will not be registered under the
Securities Act of 1933, as amended (the "SECURITIES ACT"), the securities laws
of any state of the United States or the securities laws of any other country;
(ii) that in issuing and selling the Securities to Investor pursuant hereto, the
Company is relying upon the "safe harbor" provided by Regulation S and/or on
Section 4(2) under the Securities Act; (iii) that it is a condition to the
availability of the Regulation S safe harbor that the Securities not be offered
or sold in the United States or to a U.S. Person until the expiration of a
period of forty (40) days following the issuance of such Securities; (iv) that,
notwithstanding the foregoing, prior to the expiration of forty (40) days after
the issuance of such Securities (the "RESTRICTED PERIOD"), the Securities may be
offered and sold by the Investor thereof solely either: (A) if the offer or sale
is within the United States or to or for the account of a U.S. Person (as such
terms are defined in Regulation S), the securities are offered and sold pursuant
to an effective registration statement or pursuant to Rule 144 under the
Securities Act or pursuant to an exemption from the registration requirements of
the Securities Act; or (B) the offer and sale is outside the United States and
to other than a U.S. Person. The foregoing restrictions are binding upon
subsequent transferees of the Securities, except for transferees pursuant to an
effective registration statement. After the Restricted Period, the Securities
may be offered or sold within the United States or to or for the account of a
U.S. Person only pursuant to applicable securities laws.
(b) As used herein, the term "United States" means and includes the
United States of America, its territories and possessions, any State of the
United States, and the District of Columbia, and the term "U.S. Person" (as
defined in Regulation S) means: (i) a natural person (regardless of citizenship)
resident in the United States; (ii) any partnership or corporation organized or
incorporated under the laws of the United States; (iii) any estate or trust of
which any executor, administrator or trustee is a U.S. Person; (iv) any agency
or branch of a foreign entity located in the United States; (v) any
nondiscretionary account or similar account (other than an estate or trust) held
by a dealer or other fiduciary for the benefit or account of a U.S. Person
(whether or not the dealer or other fiduciary is a U.S. Person); (vi) any
discretionary account or similar account (other than an estate or trust) held by
a dealer or other fiduciary organized, incorporated and (if an individual)
resident in the United States; and (vii) a corporation or partnership organized
under the laws of any jurisdiction other than the United States by a U.S. Person
principally for the purpose of investing in securities that have not been
registered under the Securities Act, unless organized or incorporated and owned
entirely by accredited investors (as defined in Rule 501(a) under the Securities
Act) who are not natural persons, estates or trusts.
(c) Investor agrees that with respect to the Securities until the
expiration of the Restricted Period: (i) Investor, its agents or representatives
have not and will not solicit offers to buy, offer for sale or sell any of the
Securities, or any beneficial interest therein in the United States or to or for
the account of a U.S. Person during the Restricted Period; and (ii) that,
notwithstanding the foregoing, prior to the expiration of the Restricted Period,
the Securities may be offered and sold by the Investor thereof either: (A) if
the offer or sale is within the United States or to or for the account of a U.S.
Person (as such terms are
<PAGE>
Agreement and Option to Invest
Page 3
defined in Regulation S), the securities are offered and sold pursuant to an
effective registration statement or pursuant to Rule 144 under the Securities
Act or pursuant to an exemption from the registration requirements of the
Securities Act; or (B) the offer and sale is outside the United States and to
other than a U.S. Person. The foregoing restrictions are binding upon
subsequent transferees of the Securities, except for transferees pursuant to
an effective registration statement. Investor agrees that after the
Restricted Period, the Securities may be offered or sold within the United
States or to or for the account of a U.S. Person only pursuant to applicable
securities laws.
(d) Investor has not engaged, nor is it aware that any party has
engaged, and Investor will not engage or cause any third party to engage in any
directed selling efforts (as such term is defined in Regulation S) in the United
States with respect to the Securities.
(e) Investor (i) is domiciled and has its principal place of
business outside the United States, (ii) certifies it is not a U.S. Person and
is not acquiring the securities for the account or benefit of any U.S. Person,
and (iii) any persons acting on Investor's behalf in connection therewith will
be located outside the United States.
(f) Investor is acquiring the Securities either: (i) for its own
account; or (ii) for the account and benefit of clients of whom none is a U.S.
Person and for whom Investor has, and for the entire Restricted Period will
continue to have, full investment discretion with respect to the purchase,
holding and disposition of the Securities.
(g) Investor is not a "distributor" (as defined in Regulation S) or
a "dealer" (as defined in the Securities Act).
(h) By reason of Investor's business or financial experience, or
that of the Investor's professional advisors, Investor has the capacity to
protect Investor's own interests in connection with the acquisition of the
Securities and has the ability to bear the economic risk (including the risk of
total loss) of Investor's investment.
(i) Investor further covenants that Investor will not make any sale,
transfer or other disposition of the Securities in violation of the Securities
Act, the Securities and Exchange Act of 1934, as amended (the "EXCHANGE ACT"),
or the rules of the Securities and Exchange Commission promulgated under the
Securities Act or the Exchange Act.
(j) Investor covenants that Investor will sell, transfer or
otherwise dispose of the Securities only in a manner consistent with such
Investor's representations and covenants set forth in this Section 2. In
connection therewith, Investor acknowledges that, upon issuance of the shares of
Common Stock of the Company upon conversion of the New Note, the Company shall
make a notation in its stock books regarding the restrictions on transfer set
forth in this Section 2 and shall transfer such shares on the books of the
Company only to the extent not inconsistent therewith.
(k) Investor acknowledges that Company has given Investor access to
all documents and other information required for Investor to make an informed
decision with respect to the acceptance of the Securities. In this regard,
Investor acknowledges that it has received and reviewed, among other things, the
following documents filed by the Company with the Securities and Exchange
Commission: (i) the Company's Quarterly Report on Form 10-QSB for the quarters
ended March 31, 1997 and June 30, 1997 and (ii) the Company's Annual Report on
Form 10-KSB for the year ended December 31, 1996.
<PAGE>
Agreement and Option to Invest
Page 4
Section 4. MISCELLANEOUS.
(a) This Agreement shall be governed in all respects by the laws of
the State of California.
(b) The provisions hereof shall inure to the benefit of, and be
binding upon, the successors, assigns, heirs, executors and administrators of
the parties hereto, provided, however, that the rights of an Investor hereunder
shall not be assignable without the consent of the Company, which consent shall
not be unreasonably withheld.
(c) This Agreement and the other documents delivered pursuant hereto
constitute the full and entire understanding and agreement between the parties
with regard to the subjects hereof and thereof. Neither this Agreement nor any
term hereof may be amended, waived, discharged or terminated other than by a
written instrument signed by the party against whom enforcement of any such
amendment, waiver, discharge or termination is sought.
(d) All notices and other communications required or permitted
hereunder shall be in writing and shall be deemed effectively given upon
delivery to the party to be notified in person or by courier service or five
days after deposit with the United States mail, by registered or certified mail,
postage prepaid, addressed (a) if to an Investor, at such Investor's address set
forth in SCHEDULE A or at such other address as such Investor shall have
furnished to the Company in writing, or (b) if to the Company, one copy should
be sent to its executive offices located at 37400 Central Court, Newark, CA and
addressed to the attention of the Corporate Secretary, or at such other address
as the Company shall have furnished to the Investors.
(e) No delay or omission to exercise any right, power or remedy
accruing to the Company, upon any breach or default of any Investor under this
Agreement, shall impair any such right, power or remedy of the Company nor shall
it be construed to be a waiver of any such breach or default, or an acquiescence
therein, or of or in any similar breach or default thereafter occurring; nor
shall any waiver of any single breach of default be deemed a waiver of any other
breach or default therefore or thereafter occurring. Any waiver, permit,
consent or approval of any kind or character on the part of any holder of any
breach or default under this Agreement, or any waiver on the part of any holder
of any provisions or conditions of this Agreement, must be in writing and shall
be effective only to the extent specifically set forth in such writing. All
remedies, either under this Agreement or by law or otherwise afforded to the
Company, shall be cumulative and not alternative.
(f) This Agreement may be executed in any number of counterparts,
each of which may be executed by less than all of the Investors, each of which
shall be enforceable against the parties actually executing such counterparts,
and all of which together shall constitute one instrument.
(g) In the event that any provision of this Agreement becomes or is
declared by a court of competent jurisdiction to be illegal, unenforceable or
void, this Agreement shall continue in full force and effect without said
provision; provided that no such severability shall be effective if it
materially changes the economic benefit of this Agreement to any party.
<PAGE>
Agreement and Option to Invest
Page 5
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first written above.
SOCKET COMMUNICATIONS, INC.
By:
----------------------------------
Name:
-------------------------------
Title:
-------------------------------
<PAGE>
Agreement and Option to Invest
Page 6
COUNTERPART SIGNATURE PAGE TO
AGREEMENT AND OPTION TO INVEST
DATED AS OF SEPTEMBER _____, 1997
"INVESTOR"
If you are an individual, please sign and Name (Please Print)
print your name to the right
-------------------------------
-------------------------------
Signature
Address:
-----------------------
-------------------------------
If you are signing on behalf of an entity, Name of Organization
please print the legal name of the entity
and sign to the right, indicating your title -------------------------------
By:
----------------------------
Name of Signatory (Please Print)
-------------------------------
-------------------------------
Signature
Title:
-------------------------
Address:
-----------------------
-------------------------------
<PAGE>
Agreement and Option to Invest
Page 7
SCHEDULE A
INVESTORS
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
PRIOR
INVESTOR / ADDRESS INVESTMENT
AMOUNT
- ------------------------------------------------------------------------------
<S> <C>
ForetagsByggarna BV $140,000
c/o ETS
P.O. Box 2804
1000 CV Amsterdam, Holland
- ------------------------------------------------------------------------------
Fredrik Grunewald $ 20,000
Harrviksvagen 21
139 40 Varmdo, Sweden
- ------------------------------------------------------------------------------
Goran Garberg $ 15,000
Skolvagen 7
192 70 Sollentuna, Sweden
- ------------------------------------------------------------------------------
Jelka Forvaltning AB $ 8,000
Thulegatan 25
852 36 Sundsvall, Sweden
- ------------------------------------------------------------------------------
Martin Gemvik $ 6,000
Gransvagen 6
183 30 Taby, Sweden
- ------------------------------------------------------------------------------
Bona Utilia AB $ 3,000
Havstena Gard, PL 2205
269 92 Bastad, Sweden
- ------------------------------------------------------------------------------
Cambista AB $ 3,000
Box 10144
100 55 Stockholm, Sweden
- ------------------------------------------------------------------------------
Sutre Lunden $ 3,000
Hildur Ottelinsgatan 2A
752 31 Uppsala, Sweden
- ------------------------------------------------------------------------------
Peter Lonnqvist $ 2,000
Lutzengatan 9
115 20 Stockholm, Sweden
- ------------------------------------------------------------------------------
Available for Additional Investment $300,000
- ------------------------------------------------------------------------------
TOTAL $500,000
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
</TABLE>
<PAGE>
Agreement and Option to Invest
Page 8
EXHIBIT A
MILESTONES
1. SIGNIFICANT DEVELOPMENT CONTRACTS. (a) The Development Contract is
completed with Microsoft Corporation for development and licensing of the
Kontiki prototypes; and (b) Socket and Cetronic continue the development,
manufacturing and distribution of the Kontiki product and the development,
manufacturing and distribution of the PDi Server product.
2. RECEIPT OF DEVELOPMENT FUNDING. (a) Payment of $100,000 has been received
from Microsoft Corporation in connection with the delivery of Kontiki
Phase I deliverables (designs and plastic models); and (b) Payment of
$100,000 has been received from Mitsubishi Corporation in connection with
funding the Kontiki development program.
3. COMBINATION PLANNING. The Combination Agreement has not been terminated by
either Socket or Cetronic.
4. SOCKET REVENUES FOR THE THIRD QUARTER. Net revenues for the quarter ending
September 30, 1997 are at least $1,400,000.
5. SOCKET SHARE PRICE. The average closing common stock price on the OTC
Bulletin Board during the ten (10) trading days immediately preceding
October 31, 1997 is not below $0.70 per share.
<PAGE>
Agreement and Option to Invest
Page 9
EXHIBIT B
ADDITIONAL INVESTMENT TERMS
PRINCIPAL AMOUNT $500,000
INTEREST RATE 8% per annum
MATURITY DATE One year from date of issue
CONVERSION Principal and accrued interest will be
convertible into Socket Common Stock on
demand at the rate of $0.50 per share.
SUBORDINATION The New Note shall be subordinated to the
CivicBank of Commerce loan and the World
Trade Finance loan on the same terms as the
prior note.
EVENTS OF DEFAULT An Event of Default shall mean the failure to
pay principal or interest when due an failure
to make such payment with five (5) business
days of Company's receipt of Holder's written
notice to Company of such failure to pay. In
the Event of Default, the Holder shall have
the right to convert outstanding principal
and accrued interest into Common Stock of the
Company at a conversion price equal to the
lower of (i) the Conversion Price or (ii) 75%
of the average closing price of the Company's
Common Stock on the OTC Bulletin Board or
Nasdaq SmallCap Market, as applicable, for
the five (5) business days prior to the date
of the Event of Default.
OTHER TERMS All other terms shall be substantially the
same as the Prior Note.
<PAGE>
Agreement and Option to Invest
Page 10
EXHIBIT C
EXERCISE NOTICE
Socket Communications, Inc.
37400 Central Court
Newark, CA 94560
Attention: President
1. EXERCISE OF OPTION. The undersigned ("Investor") hereby elects to
exercise Investor's option to invest an additional $____________ in Socket
Communications, Inc. (the "Company") under and pursuant to Section 2 of the
Agreement and Option to Invest dated September ___, 1997 (the "Agreement") by
and among the Company and the investors listed on Schedule A thereto.
Capitalized terms used but not otherwise defined in this Exercise Notice shall
have the respective meanings given to them in the Agreement.
2. REPRESENTATIONS OF OPTIONEE. Investor represents and warrants to the
Company that:
(i) Investor has been advised and acknowledges: (i) that the
Convertible Subordinated Promissory Note (the "Note") to be issued to Investor
under this Exercise Notice and the Agreement, and the Common Stock of the
Company issuable upon conversion of the Note (with the Note and such Common
Stock being hereinafter referred to as the "Securities") have not been, and when
issued, will not be registered under the Securities Act, the securities laws of
any state of the United States or the securities laws of any other country;
(ii) that in issuing and selling the Securities to Investor pursuant thereto,
the Company is relying upon the "safe harbor" provided by Regulation S and/or on
Section 4(2) under the Securities Act; (iii) that it is a condition to the
availability of the Regulation S safe harbor that the Securities not be offered
or sold in the United States or to a U.S. Person until the expiration of a
period of 40 days following the issuance of such Securities; (iv) that,
notwithstanding the foregoing, prior to the expiration of 40 days after the
issuance of such Securities (the "Restricted Period"), the Securities may be
offered and sold by the Investor thereof solely either: (A) if the offer or
sale is within the United States or to or for the account of a U.S. Person (as
such terms are defined in Regulation S), the securities ares offered and sold
pursuant to an effective registration statement or pursuant to Rule 144 under
the Securities Act or pursuant to an exemption from the registration
requirements of the Securities Act; or (B) the offer and sale is outside the
United State and to other than a U.S. Person. The foregoing restrictions are
binding upon subsequent transferees of the Securities, except for transferees
pursuant to an effective registration statement. After the Restricted Period,
the Securities may be offered or sold within the United States or to or for the
account of a U.S. Person only pursuant to applicable securities laws.
(ii) As used herein, the term "United States" means and includes
the United States of America, its territories and possessions, any State of the
United States, and the District of Columbia, and the term "U.S. Person" (as
defined in Regulations S) means: (i) a natural person (regardless of
citizenship) resident in the United States; (ii) any partnership or corporation
organized or incorporated under the laws of the United States; (iii) any estate
or trust of which any executor, administrator or trustee is a U.S. person;
(iv) any agency or branch of a foreign entity located in the United State; (v)
any nondiscretionary account or
<PAGE>
Agreement and Option to Invest
Page 11
similar account (other than an estate or trust) held by a dealer or other
fiduciary for the benefit or account of a U.S. Person (whether or not the
dealer or other fiduciary is a U.S. Person); (vi) any discretionary account
or similar account (other than an estate or trust) held by a dealer or other
fiduciary organized, incorporated and (if an individual) resident in the
United States; and (vii) a corporation or partnership organized under the
laws of any jurisdiction other than the United States by a U.S. Person
principally for the purpose of investing in securities that have not been
registered under the Securities Act, unless organized or incorporated and
owned entirely by accredited investors (as defined in Rule 501(a) under the
Securities Act) who are not natural persons, estates or trusts.
(iii) Investor agrees that with respect to the Securities until the
expiration of the Restricted Period: (i) Investor, its agents or
representatives have not and will not solicit offers to buy, offer for sale or
sell any of the Securities, or any beneficial interest therein in the United
States or to or for the account of a U.S. person during the Restricted Period;
and (ii) that, notwithstanding the foregoing, prior to the expiration of the
Restricted Period, the Securities may be offered and sold by the Investor
thereof either: (A) if the offer or sale is within the United States or to or
for the account of a U.S. Person (as such terms are defined in Regulations S),
the securities are offered and sold pursuant to an effective registration
statement or pursuant to Rule 144 under the Securities Act or pursuant to an
exemption from the registration requirements of the Securities Act; or (B) the
offer and sale is outside the United States and to other than a U.S. Person.
The foregoing restrictions are binding upon subsequent transferees of the
Securities, except for transferees pursuant to an effective registration
statement. Investor agrees that after the Restricted Period, the Securities may
be offered or sold within the United States or to or for the account of a U.S.
person only pursuant to applicable securities laws.
(iv) Investor has not engaged, nor is it aware that any party has
engaged, and Investor will not engage or cause any third party to engage in any
directed selling efforts (as such term is defined in Regulation S) in the United
States with respect to the Securities.
(v) Investor (i) is domiciled and has its principal place of
business outside the United States, (ii) certifies it is not a U.S. Person and
is not acquiring the securities for the account or benefit of any U.S. Person,
and (iii) any persons acting on Investor's behalf in connection therewith will
be located outside the United States.
(vi) Investor is acquiring the Securities either: (i) for its own
account; or (ii) for the account and benefit of clients of whom none is a U.S.
Person and for whom Investor has, and for the entire Restricted Period will
continue to have, full investment discretion with respect to the purchase,
holding and disposition of the Securities.
(vii) Investor is not a "distributor" (as defined in Regulation S)
or a "dealer" (as defined in the Securities Act).
(viii) By reason of Investor's business or financial experience, or
that of the Investor's professional advisor, Investor has the capacity to
protect Investor's own interests in connection with the acquisition of the
Securities and has the ability to bear the economic risk (including the risk of
total loss) of Investor's investment.
(ix) Investor further covenants that Investor will not make any
sale, transfer or other disposition of the Securities in violation of the
Securities Act, the Securities and Exchange Act of 1934, as
<PAGE>
Agreement and Option to Invest
Page 12
amended (the "Exchange Act"), or the rules of the Securities and Exchange
Commission promulgated under the Securities Act or the Exchange Act.
(x) Investor covenants that Investor will sell, transfer or
otherwise dispose of the Securities only in a manner consistent with such
Investor's representations and covenants sets forth in this Section 2. In
connection therewith, Investor acknowledges that, upon issuance of the shares of
Common Stock of the Company upon conversion of the Note, the company shall make
a notation in its stock books regarding the restrictions on transfer set forth
in this Section 2 and shall transfer such shares on the books of the Company
only to the extent not inconsistent therewith.
(xi) Investor acknowledges that Company has given Investor access
to all documents and other information required for Investor to make an informed
decision with respect to the acceptance of the Securities. In this regard,
Investor acknowledges that it has received and reviewed, among other things, the
following documents filed by the Company with the Securities and Exchange
Commission: (i) the Company's Quarterly Report on Form 10-QSB for the quarters
ended March 31, 1997 and June 31, 1997 and (ii) the Company's Annual Report on
Form 10-KSB for the year ended December 31, 1996.
3. CONVERTIBLE SUBORDINATED PROMISSORY NOTE. Investor herewith delivers
to the Company a certified check or wire transfer in the amount of the
investment that Optionee has elected make. Upon receipt of such check or wire
transfer, the Company shall promptly execute and deliver to Investor a
Convertible Subordinated Promissory Note that incorporates the Additional
Investment Terms (and that shall be in substantially similar form as the note
evidencing the Prior Investment).
<PAGE>
Agreement and Option to Invest
Page 13
4. ENTIRE AGREEMENT. The Agreement is incorporated herein by reference.
This Exercise Notice and Agreement constitute the entire agreement of the
parties and supersede in their entirety all prior undertakings and agreements of
the Company and Investor with respect to the subject matter hereof. This
Exercise Notice and the Agreement are governed by California law except for that
body of law pertaining to conflict of laws.
Submitted by: Accepted by:
INVESTOR: Socket Communications, Inc.
By:
- --------------------------------- -------------------------------
Address: Its:
------------------------- ------------------------------
-------------------------
Dated: Dated:
---------------------------- ---------------------------
<PAGE>
EXHIBIT H
THE SECURITIES REPRESENTED BY THIS INSTRUMENT HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR QUALIFIED UNDER APPLICABLE STATE
SECURITIES LAWS AND HAVE BEEN TAKEN FOR INVESTMENT PURPOSES ONLY AND NOT WITH A
VIEW TO OR FOR SALE IN CONNECTION WITH ANY DISTRIBUTION THEREOF. THE SECURITIES
MAY NOT BE SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION AND
QUALIFICATION WITHOUT, EXCEPT UNDER CERTAIN SPECIFIED LIMITED CIRCUMSTANCES, AN
OPINION OF COUNSEL FOR THE HOLDER, CONCURRED IN BY COUNSEL FOR THE COMPANY, THAT
SUCH REGISTRATION AND QUALIFICATION ARE NOT REQUIRED.
SOCKET COMMUNICATIONS, INC.
AMENDED AND RESTATED
SUBORDINATED CONVERTIBLE PROMISSORY NOTED
$300,000 NEWARK, CALIFORNIA
FEBRUARY 14, 1997
SOCKET COMMUNICATIONS, INC., a Delaware corporation (the "COMPANY"), for
value received, hereby promises to pay to the order of Telenor AS or holder
("HOLDER") in lawful money of the United States at the address of Holder set
forth below, the principal amount of Three Hundred Thousand Dollars $300,000,
together with simple interest at the rate of eight percent (8%) per annum
(calculated on the basis of actual days elapsed and a year of 365 days).
Accrued interest shall be payable in cash only at the time the Company pays any
portion of the principal amount of this Note. If this Note is converted
pursuant to Section 4 hereof, accrued interest may be converted as set forth
therein; any accrued interest that is not so converted shall be payable in cash.
This Note was originally executed on February 14, 1997. This Note was
amended and restated as of August 14, 1997 to, among other things, extend the
Maturity Date (as defined in Section 1(a) hereof). The following is a statement
of the rights of Holder and the conditions to which this Note is subject, and to
which the Holder hereof, by the acceptance of this Note, agrees.
1. PAYMENTS; PREPAYMENTS
(a) All principal, interest and other amounts due hereunder shall be
due and payable on the earlier of (i) August 14, 1998 (the "MATURITY DATE") and
(ii) the day on which this Note becomes immediately due and payable pursuant to
Section 10 hereof.
(b) This Note may be prepaid, in whole or in part, from time to time
ten (10) business days after Holder receives written notice of such prepayment
from the Company; Holder shall then have until the end of such ten (10) business
day period to notify the Company in writing that it wishes to convert all or
part of the outstanding principal and accrued interest under this Note into
Common Stock pursuant to Section 4 below. Prepayments shall be (i) reduced by
any amounts that Holder desires to so convert into Common Stock and then (ii)
applied first to outstanding interest, and then to principal.
(c) Upon payment in full of all principal and interest payable
hereunder, this Note shall be surrendered to Company for cancellation.
<PAGE>
Socket Communications, Inc.
Amended and Restated Subordinated
Convertible Promissory Note
Page 2
2. SUBORDINATION
(a) "Senior Indebtedness" means (A) the principal of and premium, if
any, and interest on indebtedness of the Company incurred pursuant to the
Promissory Note and Loan Agreement, each dated as of July 5, 1995, between the
Company and CivicBank of Commerce; and (B) all present and future indebtedness,
obligations, liabilities, claims, rights and demands of any kind which may be
now or hereafter owing from the Company to World Trade in connection with that
certain Note in the amount of $500,000 (or such lesser amount as the Company and
World Trade may finally agree) issued by the Company in favor of World Trade and
a related Commercial Security Agreement and Commercial Pledge Agreement between
the Company and World Trade, including, without limitation, all principal, all
interest, all costs and attorneys' fees, all sums paid for the purpose of
protecting World Trade's rights in security (such as paying for insurance on
collateral if the owner fails to do so), and all other obligations of the
Company to World Trade, secured or unsecured, of any nature whatsoever. The
Company agrees and the holder of this Note, by acceptance thereof, agrees,
expressly for the benefit of the holder of the Senior Indebtedness, that, except
as otherwise provided herein, upon (i) an event of default under the Senior
Indebtedness, or (ii) any dissolution, winding up, or liquidation of the
Company, whether or not in bankruptcy, insolvency or receivership proceedings,
the Company shall not pay, and holder of such Note shall not be entitled to
receive, any amount in respect of the principal and interest of such Note unless
and until the Senior Indebtedness, shall have been paid or otherwise discharged.
Upon (1) an event of default under the Senior Indebtedness, or (2) any
dissolution, winding up or liquidation of the Company, any payment or
distribution of assets of the Company, which the holder of this Note would be
entitled to receive but for the provisions hereof, shall be paid by the
liquidating trustee or agent or other person making such payment or distribution
directly to the holders of the Senior Indebtedness ratably according to the
aggregate amounts remaining unpaid on the Senior Indebtedness after giving
effect to any concurrent payment or distribution to the holders of the Senior
Indebtedness. Subject to the payment in full of the Senior Indebtedness and
until this Note is paid in full, the holder of this Note shall be subrogated to
the rights of the holders of the Senior Indebtedness (to the extent of payments
or distributions previously made to the holders of the Senior Indebtedness
pursuant to this Section 2(a)) to receive payments or distributions of assets of
the Company applicable to the Senior Indebtedness.
(b) This Section 2 is not intended to impair, as between the
Company, its creditors (other than the holders of the Senior Indebtedness) and
the holder of this Note, the unconditional and absolute obligation of the
Company to pay the principal of and interest on the Note or affect the relative
rights of the holder of this Note and the other creditors of the Company, other
than the holders of the Senior Indebtedness. Nothing in this Note shall prevent
the holder of this Note from exercising all remedies otherwise permitted by
applicable law upon default under the Note, subject to the rights, if any, of
the holders of the Senior Indebtedness in respect to cash, property or
securities of the Company received upon the exercise of any such remedy.
(c) This Section 2 is not intended to impair, as between the
Company, its creditors (other than the holders of the Senior Indebtedness) and
the holder of this Note, the unconditional and absolute obligation of the
Company to pay the ;principal of and interest on the Note or affect the relative
rights of the holder of this Note and the other creditors of the Company, other
than the holders of the Senior Indebtedness. Nothing in this Note shall prevent
the holder of this Note from exercising all remedies otherwise permitted by
applicable law upon default under the Note, subject to the rights, if any, of
the holders of the Senior Indebtedness in respect to cash, property or
securities of the Company received upon the exercise of any such remedy.
<PAGE>
Socket Communications, Inc.
Amended and Restated Subordinated
Convertible Promissory Note
Page 3
3. EVENTS OF DEFAULT
The Company's failure to pay (i) when due any principal payment on the
due date hereunder or (ii) any interest or other payment required under the
terms of this Note on the date due, and failure to make such payment within five
(5) business days of Company's receipt of Holder's written notice to Company of
such failure to pay, shall constitute an Event of Default.
4. CONVERSION
(a) In lieu of receiving cash payment for principal amounts and
accrued interest due under this Note, Holder shall have the right to convert
outstanding principal and accrued interest under this Note into Common Stock of
the Company at a conversion price per share equal to $0.50 (the "CONVERSION
PRICE") at any time on or prior to the Maturity Date.
(b) In addition to the conversion right provided in Section 4(a)
above, upon an Event of Default, in lieu of receiving cash payment for principal
amounts and accrued interest due under this Note, Holder shall have the right to
convert outstanding principal and accrued interest under this Note into Common
Stock of the Company at a conversion price per share equal to the lower of (i)
the Conversion Price or (ii) 75% of the average closing price of the Company's
Common Stock on the OTC Bulletin Board or Nasdaq Small Cap Market, as
applicable, for five (5) business days prior to the date of the Event of
Default.
(c) Holder may exercise its conversion right by providing written
notice to the Company of Holder's intention to exercise its conversion right and
the amount of principal and accrued interest that it wishes to convert (the
"CONVERSION AMOUNT") at least ten (10) days prior to the date on which it wishes
to convert (the "CONVERSION DATE") (unless such notice is given pursuant to the
terms of Section 1(b) above, in which event notice shall comply with the terms
thereof). No fractional shares of Common Stock shall be issued upon conversion
of this Note. Promptly after the conversion of this Note, the Holder shall
surrender this Note, duly endorsed, at the principal office of Company. At its
expense, Company shall, as soon as practicable thereafter (or as otherwise noted
in the provisions above), issue and deliver to such Holder at such principal
office a certificate or certificates for the number of shares of such Common
Stock to which the Holder shall be entitled upon such conversion (bearing such
legends as are required by applicable state and federal securities laws in the
opinion of counsel to Company). In addition, unless this Note has been fully
converted, a new Note representing the principal amount that shall not have been
converted into Common Stock shall also be issued to Holder as soon as possible
thereafter. Upon conversion of this Note in full, Company shall be forever
released from all its obligations and liabilities under this Note including
principal, interest and any other amounts due and owing pursuant hereto. Any
notice from the Holder of an election to convert by the Company shall be
irrevocable.
(d) If at any time the number of authorized but unissued shares of
Common Stock shall not be sufficient to effect the conversion of the entire
outstanding principal amount and accrued interest under this Note, Company will
use its best efforts to take such corporate action as may be necessary, in the
opinion of its counsel, to increase its authorized but unissued shares of Common
Stock to such number of shares as shall be sufficient for such purposes.
<PAGE>
Socket Communications, Inc.
Amended and Restated Subordinated
Convertible Promissory Note
Page 4
5. REGISTRATION RIGHT.
(a) Following the Conversion Date, and within a reasonable amount of
time following the conversion by Holder of any outstanding principal and accrued
interest under this Note into Common Stock of the Company, the Company will use
best efforts to (i) file a registration statement under the Securities Act of
1933, as amended (the "SECURITIES ACT") registering such shares for resale to
the public, (ii) have such registration statement declared effective by the
Securities and Exchange Commission, (iii) register and qualify the securities
covered by such registration statement under the Blue Sky laws of such
jurisdictions as shall be reasonably requested by the Holder (provided that the
Company shall not be required in connection therewith or as a condition thereto
to qualify to do business or to file a general consent to service of process in
any such states or jurisdictions, unless the Company is already subject to
service in such jurisdiction and except as may be required by the Securities
Act), (iv) cause all securities registered pursuant hereunder to be listed on
each securities exchange on which similar securities issued by the Company are
then listed, and (v) file updates to such registration statement as necessary to
keep it effective until the date that all remaining such shares may be sold to
the public without registration within a period of ninety (90) days; PROVIDED
THAT, the Company may suspend such registration for up to two periods of not
more than ninety (90) days each in any 12-month period if necessary (x) to
enable the Company to update the registration statement or (y) to undertake
another sale of securities.
(b) All Registration Expenses (as hereafter defined) incurred in
connection with any registration pursuant to this Section 5 shall be borne by
the Company. "Registration Expenses" shall mean all expenses incurred by the
Company in complying with this Section 5, including, without limitation, all
registration, qualification and filing fees, printing expenses, fees and
disbursements of counsel for the Company, the reasonable costs of one special
legal counsel to represent Holder in any such registration and blue sky fees and
expenses. "Registration Expenses" shall not include (if applicable) any
underwriting discounts or selling commissions.
(c) INDEMNIFICATION.
(i) The Company will indemnify the Holder, each of its
officers and directors and partners, and each person controlling such Holder
within the meaning of Section 15 of the Securities Act, with respect to which
registration, qualification or compliance has been effected pursuant to this
Section 5, against all expenses, claims, losses, damages or liabilities (or
actions in respect thereof), including any of the foregoing incurred in
settlement of any litigation, commenced or threatened, arising out of or based
on any untrue statement (or alleged untrue statement) of a material fact
contained in any registration statement, prospectus, preliminary prospectus,
offering circular or other document, or any amendment or supplement thereto,
incident to any such registration, qualification or compliance, or based on any
omission (or alleged omission) to state therein a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances in which they were made, not misleading, or any violation or any
alleged violation by the Company of any rule or regulation promulgated under the
Securities Act or the Exchange Act or any state securities law applicable to the
Company in connection with any such registration, qualification or compliance,
and the Company will reimburse each such Holder, each of its officers and
directors, and each person controlling such Holder, for any legal and any other
expenses reasonably incurred in connection with investigating, preparing or
defending any such claim, loss, damage, liability or action, as such expenses
are incurred, provided that the Company will not be liable in any such case to
the extent that any such claim, loss, damage, liability or expense arises out of
or is based on any
<PAGE>
Socket Communications, Inc.
Amended and Restated Subordinated
Convertible Promissory Note
Page 5
untrue statement or omission or alleged untrue statement or omission, made in
reliance upon and in conformity with written information furnished to the
Company by an instrument duly executed by such Holder or controlling person
and stated to be specifically for use therein.
(ii) The Holder will indemnify the Company, each of its
directors and officers, and each person who controls the Company within the
meaning of Section 15 of the Securities Act against all claims, losses, damages
and liabilities (or actions in respect thereof) arising out of or based on any
untrue statement (or alleged untrue statement) of a material fact contained in
any such registration statement, prospectus, offering circular or other
document, or any omission (or alleged omission) to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, and will reimburse the Company, such directors, officers or control
persons for any legal or any other expenses reasonably incurred in connection
with investigating or defending any such claim, loss, damage, liability or
action, as such expenses are incurred, in each case to the extent, but only to
the extent, that such untrue statement (or alleged untrue statement) or omission
(or alleged omission) is made in such registration statement, prospectus,
offering circular or other document in reliance upon and in conformity with
written information furnished to the Company by an instrument duly executed by
such Holder and stated to be specifically for use therein.
6. RIGHT OF PARTICIPATION. Upon the first (and only the first) offering
(or series of related offerings in any 90-day period) by the Company subsequent
to the date hereof of any shares of, or securities convertible into or
exercisable for any shares of, any class of its capital stock ("SECURITIES"),
the Company shall offer to the Holder and each of its affiliates that holds a
Subordinated Convertible Promissory Note issued by the Company (collectively,
the "AFFILIATED HOLDERS") the option to purchase up to an aggregate of Two
Million Dollars ($2,000,000) worth of the offered Securities not to exceed 50%
of the offering (the "AFFILIATED HOLDER MAXIMUM"), in accordance with the
following provisions:
(a) The Company shall deliver a notice to the Holder stating (i) its
bona fide intention to offer such Securities, (ii) the number of such Securities
to be offered, (iii) the price, if any, for which it proposes to offer such
Securities, and (iv) the terms of such offer. The Holder will distribute this
notice to the other Affiliated Holders, and the Affiliated Holders will
apportion the Affiliated Holder Maximum amongst themselves as they see fit.
(b) Within fifteen (15) calendar days after receipt of the Notice,
the Holder will notify the Company of the portion of the Affiliated Holder
Maximum that the Affiliated Holders wish to purchase, along with a detailed list
of the apportionment of such Affiliated Holder Maximum amongst the Affiliated
Holders.
(c) The right of participation in this Section 6 shall not be
applicable (i) to the issuance or sale of shares of capital stock (or options
therefor) to employees, officers, directors or consultants for the primary
purpose of soliciting or retaining their services, (ii) to the issuance or sale
of the Company's securities to leasing entities or financial institutions in
connection with commercial leasing or borrowing transactions, or (iii) to
conversions of convertible securities.
<PAGE>
Socket Communications, Inc.
Amended and Restated Subordinated
Convertible Promissory Note
Page 6
7. REPRESENTATIONS AND WARRANTIES OF HOLDER. By its acceptance hereof,
Holder represents and warrants to Company that:
(a) Holder has been advised that this Note and the Common Stock of
the Company issuable upon conversion of the Note (with the Note and such Common
Stock being hereinafter collectively referred to as the "SECURITIES") have not
been, and when issued, will not be registered under the Securities Act, the
securities laws of any state of the United States or the securities laws of any
other country; (ii) that in issuing and selling the Securities to Holder
pursuant hereto, the Company is relying upon the "safe harbor" provided by
Regulations S and/or on Section 4(2) under the Securities Act; (iii) that it is
a condition to the availability of the Regulation S safe harbor that the
Securities not be offered or sold in the United States or to a U.S. Person until
the expiration of a period of forty (40) days following the issuance of such
Securities; (iv) that, notwithstanding the foregoing, prior to the expiration of
forty (40) days after the issuance of such Securities (the "RESTRICTED PERIOD"),
the Securities may be offered and sold by the holder thereof solely either:
(A) if the offer or sale is within the United States or to or for the Account of
a U.S. Person (as such terms are defined in Regulation S), the securities are
offered and sold pursuant to an effective registration statement or pursuant to
Rule 144 under the Securities Act or pursuant to an exemption from the
registration requirements of the Securities Act; or (B) the offer and sale is
outside the United States and to other than a U.S. Person. The foregoing
restrictions are binding upon subsequent transferees of the Securities, except
for transferees pursuant to an effective registration statement. After the
Restricted Period, the Securities may be offered or sold within the United
States or to or for the account of a U.S. Person only pursuant to applicable
securities laws.
(b) As used herein, the term "United States" means and includes the
United States of America, its territories and possessions, any State of the
United States, and the District of Columbia, and the term "U.S. Person" (as
defined in Regulation S) means: (i) a natural person (regardless of
citizenship) resident in the United States; (ii) any partnership or corporation
organized or incorporated under the laws of the United States; (iii) any estate
or trust of which any executor, administrator or trustee is a U.S. Person;
(iv) any agency or branch of a foreign entity located in the United States;
(v) any nondiscretionary account or similar account (other than an estate or
trust) held by a dealer or other fiduciary for the benefit or account of a U.S.
Person (whether or not the dealer or other fiduciary is a U.S. Person); (vi) any
discretionary account or similar account (other than an estate or trust) held by
a dealer or other fiduciary organized, incorporated and (if an individual)
resident in the United States; and (vii) a corporation or partnership organized
under the laws of any jurisdiction other than the United States by a U.S. Person
principally for the purpose of investing in securities that have not been
registered under the Securities Act, unless organized or incorporated and owned
entirely by accredited investors (as defined in Rule 501(a) under the Securities
Act) who are not natural persons, estates or trusts.
(c) Holder agrees that with respect to the Securities until the
expiration of the Restricted Period: (i) Holder, its agents or representatives
have not and will not solicit offers to buy, offer for sale or sell any of the
Securities, or any beneficial interest therein in the United States or to or for
the account of a U.S. Person during the Restricted Period; and (ii) that,
notwithstanding the foregoing, prior to the expiration of the Restricted Period,
the Securities may be offered and sold by the holder thereof either: (A) if the
offer or sale is within the United States or to or for the account of a U.S.
Person (as such terms are defined in Regulation S), the securities are offered
and sold pursuant to an effective registration statement or pursuant to Rule 144
under the Securities Act or pursuant to an exemption from the registration
requirements of the Securities Act; or (B) the offer and sale is outside the
United States and to other than a U.S. Person. The
<PAGE>
Socket Communications, Inc.
Amended and Restated Subordinated
Convertible Promissory Note
Page 7
foregoing restrictions are binding upon subsequent transferees of the
Securities, except for transferees pursuant to an effective registration
statement. Holder agrees that after the Restricted Period, the Securities
may be offered or sold within the United States or to or for the account of a
U.S. Person only pursuant to applicable securities laws.
(d) Holder has not engaged, nor is it aware that any party has
engaged, and Holder will not engage or cause any third party to engage in any
directed selling efforts (as such term is defined in Regulation S) in the United
States with respect to the Securities.
(e) Holder (i) is domiciled and has its principal place of business
outside the United States, (ii) certifies it is not a U.S. Person and is not
acquiring the securities for the account or benefit of any U.S. Person, and
(iii) any persons acting on Holder's behalf in connection therewith will be
located outside the United States.
(f) Holder is acquiring the Securities either: (i) for its own
account; or (ii) for the account and benefit of clients of whom none is a U.S.
Person and for whom Holder has, and for the entire Restricted Period will
continue to have, full investment discretion with respect to the purchase,
holding and disposition of the Securities.
(g) Holder is not a "distributor" (as defined in Regulation S) or a
"dealer" (as defined in the Securities Act).
(h) By reason of Holder's business or financial experience, or that
of the Holder's professional advisor, Holder has the capacity to protect
Holder's own interests in connection with the acquisition of the Securities and
has the ability to bear the economic risk (including the risk of total loss) of
Holder's investment.
(i) Holder further covenants that Holder will not make any sale,
transfer or other disposition of the Securities in violation of the Securities
Act, the Securities and Exchange Act of 1934, as amended (the "EXCHANGE ACT"),
or the rules of the Securities and Exchange Commission promulgated under the
Securities Act or the Exchange Act.
(j) Holder covenants that Holder will sell, transfer or otherwise
dispose of the Securities only in a manner consistent with such Holder's
representations and covenants set forth in this Section 7. In connection
therewith, Holder acknowledges that, upon issuance of the shares of Common Stock
of the Company upon conversion of this Note, the Company shall make a notation
in its stock books regarding the restrictions on transfer set forth in this
Section 7 and shall transfer such shares on the books of the Company only to the
extent not inconsistent therewith.
(k) Holder acknowledges that Company has given Holder access to all
documents and other information required for Holder to make an informed decision
with respect to the acceptance of the Securities. In this regard, Holder
acknowledges that it has received and reviewed, among other things, the
following documents filed by the Company with the Securities and Exchange
Commission: (i) the Company's Quarterly Report on Form 10-QSB for the quarters
ended March 31, 1997 and June 30, 1997 and (ii) the Company's Annual Report on
Form 10-KSB for the year ended December 31, 1996.
<PAGE>
Socket Communications, Inc.
Amended and Restated Subordinated
Convertible Promissory Note
Page 8
8. ATTORNEYS' FEES. If the indebtedness represented by this Note or any
part thereof is collected in bankruptcy, receivership or other judicial
proceedings or if this Note is placed in the hands of attorneys for collection
after default, Company agrees to pay, in addition to the principal and interest
payable hereunder, reasonable attorneys' fees and costs incurred by Holder.
9. NOTICES. Except as otherwise provided herein, all notices requests,
demands, consents, instructions or other communications to or upon the Company
or Holder hereunder shall be by telecopy or in writing and telecopied, mailed or
delivered to each party at telecopier number or its address set forth below (or
to such other telecopy number or address as the recipient of any notice shall
have notified the other in writing). All such notices and communications shall
be effective (a) when sent by Federal Express or other overnight service of
recognized standing, on the business day following the deposit with such service
(if sent to an address in the same country as the sender) or on the third
business day following the deposit with such service (if sent to an address in a
different country from the sender); (b) when mailed, by registered or certified
mail, first class postage prepaid and addressed as aforesaid through the United
States Postal Service, upon receipt; (c) when delivered by hand, upon delivery;
and (d) when telecopied, upon confirmation of receipt.
HOLDER: Telenor Venture AS
P.O. Box 6701
St. Olavs Plass
N-0130 Oslo, Norway
COMPANY: Socket Communications, Inc.
37400 Central Court
Newark, CA 94560
Attention: Chief Financial Officer
(415) 744-2700 (telephone)
(415) 744-2727 (telecopy)
10. ACCELERATION: This Note shall become immediately due and payable
(a) upon an Event of Default, (b) if the Company commences any proceeding in
bankruptcy or for dissolution, liquidation, winding-up, composition or other
relief under state or federal bankruptcy laws, or (c) if such proceedings are
commenced against the Company, or a receiver or trustee is appointed for the
Company or a substantial part of its property, and such proceeding or
appointment is not dismissed or discharged within 60 days after its
commencement.
11. WAIVERS. Company hereby waives presentment, demand for performance,
notice of non-performance, protest, notice of protest and notice of dishonor.
No delay on the part of Holder in exercising any right hereunder shall operate
as a waiver of such right or any other right.
12. PAYMENT. Payment shall be made in lawful tender of the United States.
13. USURY. In the event any interest is paid on this Note which is deemed
to be in excess of the then legal maximum rate, then that portion of the
interest payment representing an amount in excess of the
<PAGE>
Socket Communications, Inc.
Amended and Restated Subordinated
Convertible Promissory Note
Page 9
then legal maximum rate shall be deemed a payment of principal and applied
against the principal of this Note.
14. GOVERNING LAW. This Note and all actions arising out of or in
connection with this Note shall be governed by and construed in accordance with
the laws of the State of California, without regard to the conflicts of law
provisions of the State of California or of any other state or country.
15. SUCCESSORS AND ASSIGNS.
(a) The rights and obligations of the Company and the Holder of this
Note shall be binding upon and benefit the successors, assigns, heirs,
administrators and transferees of the parties.
(b) Holder shall not transfer this Note without the prior written
consent of Company, except that Holder may transfer the Note without such prior
written consent to a collection agency following an Event of Default.
(c) Neither this Note nor any of the rights, interests or
obligations hereunder may be assigned, by operation of law or otherwise, in
whole or in part, by Company without the prior written consent of the Holder
except in connection with an assignment in whole to a successor corporation to
Company, provided that such successor corporation acquires all or substantially
all of Company's property and assets and Holder's rights hereunder are not
impaired.
SOCKET COMMUNICATIONS, INC.
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
Agreed and Accepted:
TELENOR VENTURE AS
By:
--------------------------
Name:
------------------------
Title:
-----------------------
<PAGE>
EXHIBIT I
THE SECURITIES REPRESENTED BY THIS INSTRUMENT HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR QUALIFIED UNDER APPLICABLE STATE
SECURITIES LAWS AND HAVE BEEN TAKEN FOR INVESTMENT PURPOSES ONLY AND NOT WITH
A VIEW TO OR FOR SALE IN CONNECTION WITH ANY DISTRIBUTION THEREOF. THE
SECURITIES MAY NOT BE SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH
REGISTRATION AND QUALIFICATION WITHOUT, EXCEPT UNDER CERTAIN SPECIFIC LIMITED
CIRCUMSTANCES, AN OPINION OF COUNSEL FOR THE HOLDER, CONCURRED IN BY COUNSEL
FOR THE COMPANY, THAT SUCH REGISTRATION AND QUALIFICATION ARE NOT REQUIRED.
SOCKET COMMUNICATIONS, INC.
SUBORDINATED CONVERTIBLE PROMISSORY NOTE
Newark, California
$________ __________________
SOCKET COMMUNICATIONS, INC., a Delaware corporation (the "COMPANY"), for
value received, hereby promises to pay to the order of ___________________ or
holder ("HOLDER") in lawful money of the United States at the address of
Holder set forth below, the principal amount of _____________________
($_________), together with simple interest at the rate of eight percent (8%)
per annum (calculated on the basis of actual days elapsed and a year of 365
days). Accrued interest shall be payable in cash only at the time the Company
pays any portion of the principal amount of this Note. If this Note is
converted pursuant to Section 4 hereof, accrued interest may be converted as
set forth therein; any accrued interest that is not so converted shall be
payable in cash.
The following is a statement of the rights of Holder and the conditions
to which this Note is subject, and to which the Holder hereof, by the
acceptance of this Note, agrees.
1. PAYMENTS; PREPAYMENTS.
(a) All principal, interest and other amounts due hereunder shall be
due and payable on the earlier of (i) December 12, 1998 (the "MATURITY DATE")
and (ii) the day on which this Note becomes immediately due and payable
pursuant to Section 10 hereof.
(b) This Note may be prepaid, in whole or in part, from time to time
ten (10) business days after Holder receives written notice of such
prepayment from the Company; Holder shall then have until the end of such ten
(10) business day period to notify the Company in writing that it wishes to
convert all or part of the outstanding principal and accrued interest under
this Note into Common Stock pursuant to Section 4 below. Prepayments shall
be (i) reduced by any amounts that Holder desires to so convert into Common
Stock and then (ii) applied first to outstanding interest, and then to
principal.
(c) upon payment in full of all principal and interest payable
hereunder, this Note shall be surrendered to Company for cancellation.
2. SUBORDINATION
(a) "Senior Indebtedness" means (A) the principal of and premium, if any,
and interest on indebtedness of the Company incurred pursuant to the Promissory
Note and Loan Agreement, each dated as
<PAGE>
Socket Communications, Inc.
Subordinated Convertible
Promissory Note
Page 2
of July 5, 1995, between the Company and CivicBank of Commerce; and (B) all
present and future indebtedness, obligations, liabilities, claims, rights and
demands of any kind which may be now or hereafter owing from the company to
World Trade in connection with that certain Note in the amount of $500,000
(or such lesser amount as the Company and World Trade may finally agree)
issued by the Company in favor of World Trade and a related Commercial
Security Agreement and Commercial Pledge Agreement between the Company and
World Trade, including, without limitation, all principal, all interest, all
costs and attorneys' fees, all sums paid for the purpose of protecting World
Trade's rights in security (such as paying for insurance on collateral if the
owner fails to do so), and all other obligations of the Company to World
Trade, secured or unsecured, of any nature whatsoever. The Company agrees
and the Holder of this Note, by acceptance thereof, agrees, expressly for the
benefit of the holder of the Senior Indebtedness, that, except as otherwise
provided herein, upon (i) an event of default under the Senior Indebtedness,
or (ii) any dissolution, winding up, or liquidation of the Company, whether
or not in bankruptcy, insolvency or receivership proceedings, the Company
shall not pay, and the holder of such Note shall not be entitled to receive,
any amount in respect of the principal and interest of such Note unless and
until the Senior Indebtedness shall have been paid or otherwise discharged.
Upon (1) an event of default under the Senior Indebtedness, or (2) any
dissolution, winding up or liquidation of the Company, any payment or
distribution of assets of the Company, which the holder of this Note would be
entitled to receive but for the provisions hereof, shall be paid by the
liquidating trustee or agent or other person making such payment or
distribution directly to the holder of the Senior Indebtedness ratably
according to the aggregate amounts remaining unpaid on the Senior
Indebtedness after giving effect to any concurrent payment or distribution to
the holder of the Senior Indebtedness. Subject to the payment in full of the
Senior Indebtedness and until this Note is paid in full, the holder of this
Note shall be subrogated to the rights of the holders of the Senior
Indebtedness (to the extent of payments of distributions previously made to
the holder of the Senior Indebtedness pursuant to this Section 2(a)) to
receive payments or distributions of assets of the Company applicable to the
Senior Indebtedness.
(b) This Section 2 is not intended to impair, as between the Company,
its creditors (other than the holders of the Senior Indebtedness) and the
holder of this Note, the unconditional and absolute obligation of the Company
to pay the principal of and interest on the Note or affect the relative
rights of the holder of this Note and the other creditors os the Company,
other than the holder of the Senior Indebtedness. Nothing in this Note shall
prevent the holder of this Note from exercising all remedies otherwise
permitted by applicable law upon default under the Note, subject to the
rights, if any, of the holder of the Senior Indebtedness in respect to cash,
property or securities of the Company received upon the exercise of any such
remedy.
3. EVENTS OF DEFAULT. The Company's failure to pay (i) when due any
principal payment on the due date hereunder or (ii) any interest or other
payment required under the terms of this Note on the date due, and failure to
make such payment within five (5) business days of Company's receipt of
Holder's written notice to Company of such failure to pay, shall constitute
an Event of Default.
4. CONVERSION.
(a) In lieu of receiving cash payment for principal amounts and accrued
interest due under this Note, Holder shall have the right to convert
outstanding principal and accrued interest under this Note into Common Stock
of the Company at a conversion price per share equal to $0.50 (the
"CONVERSION PRICE") at any time on or prior to the Maturity Date, subject to
the provisions of Section 2 of that certain Agreement and Option to Invest of
even date herewith between the Company and Holder.
<PAGE>
Socket Communications, Inc.
Subordinated Convertible
Promissory Note
Page 3
(b) In addition to the conversion right provided in Section 4(a) above,
upon an Event of Default, in lieu of receiving cash payment for principal
amounts and accrued interest due under this Note, Holder shall have the right
to convert outstanding principal and accrued interest under this Note into
Common Stock of the Company at a conversion price per share equal to the
lower of (i) the Conversion Price or (ii) 75% of the average closing price of
the Company's Common Stock on the OTC Bulletin Board or Nasdaq SmallCap
market, as applicable, for the five (5) business days prior to the date of
the Event of Default.
(c) Holder may exercise its conversion right by providing written
notice to the Company of Holder's intention to exercise its conversion right
and the amount of principal and accrued interest that it wishes to convert
(the "CONVERSION AMOUNT") at least ten (10) days prior to the date on which
it wishes to convert (the "CONVERSION DATE") (unless such notice is given
pursuant to the terms of Section 1(b) above, in which event notice shall
comply with the terms thereof). No fractional shares of Common Stock shall
be issued upon conversion of this Note. Promptly after the conversion of
this Note, the Holder shall surrender this Note, duly endorsed, at the
principal office of Company. At its expense, Company shall, as soon as
practicable thereafter (or as otherwise noted in the provisions above), issue
and deliver to such Holder at such principal office a certificate or
certificates for the number of shares of such Common Stock to which the
Holder shall be entitled upon such conversion (bearing such legends as are
required by applicable state and federal securities laws in the opinion of
counsel to Company). In addition, unless this Note has been fully converted,
a new Note representing the principal amount that shall not have been
converted into Common Stock shall also be issued to Holder as soon as
possible thereafter. Upon conversion of this Note in full, Company shall be
forever released from all its obligations and liabilities under this Note
including principal, interest and any other amounts due and owing pursuant
hereto. Any notice from the Holder of an election to convert by the Company
shall be irrevocable.
(d) If at any time the number of authorized but unissued shares of
Common Stock shall not be sufficient to effect the conversion of the entire
outstanding principal amount and accrued interest under this Note, Company
will use its best efforts to take such corporate action as may be necessary,
in the opinion of its counsel, to increase its authorized but unissued shares
of Common Stock to such number of shares as shall be sufficient for such
purposes.
5. REGISTRATION RIGHT.
(a) Following the Maturity Date, and within a reasonable amount of time
following the conversion by Holder of any outstanding principal and accrued
interest under this Note into Common Stock of the Company, the Company will
use reasonable efforts to (i) file a registration statement under the
Securities Act of 1933, as amended (the "SECURITIES ACT") registering such
shares for resale to the public, (ii) have such registration statement
declared effective by the Securities and Exchange Commission, (iii) register
and qualify the securities covered by such registration statement under the
Blue Sky laws of such jurisdictions as shall be reasonably requested by the
Holder (provided that the Company shall not be required in connection
therewith or as a condition thereto to qualify to do business or to file a
general consent to service of process in any such states or jurisdictions,
unless the Company is already subject to service in such jurisdiction and
except as may be required by the Securities Act), (iv) cause all securities
registered pursuant hereunder to be listed on each securities exchange on
which similar securities issued by the Company are then listed, and (v) file
updates to such registration statement as necessary to keep it effective
until the date that all remaining such shares may be sold to the public
without registration within a period of 90 days; PROVIDED THAT, the Company
may suspend such registration for up to two periods of not more than 90 days
each in any
<PAGE>
Socket Communications, Inc.
Subordinated Convertible
Promissory Note
Page 4
12-month period if necessary (x) to enable the Company to update the
registration statement or (y) to undertake another sale of securities.
(b) All Registration Expenses (as hereafter defined) incurred in
connection with any registration pursuant to this Section 5 shall be borne by
the Company. "Registration Expenses" shall mean all expenses incurred by the
Company in complying with this Section 5, including, without limitation, all
registration, qualification and filing fees, printing expenses, fees and
disbursements of counsel for the Company, the reasonable costs of one special
legal counsel to represent Holder in any such registration, and blue sky fees
and expenses. "Registration Expenses" shall not include (if applicable) any
underwriting discounts or selling commissions.
(c) INDEMNIFICATION.
(i) The Company will indemnify the Holder, each of its officers
and directors and partners, and each person controlling such Holder within
the meaning of Section 15 of the Securities Act, with respect to which
registration, qualification or compliance has been effected pursuant to this
Section 5, against all expenses, claims, losses, damages or liabilities (or
actions in respect thereof), including any of the foregoing incurred in
settlement of any litigation, commenced or threatened, arising out of or
based on any untrue statement (or alleged untrue statement) of a material
fact contained in any registration statement, prospectus, preliminary
prospectus, offering circular or other document, or any amendment or
supplement thereto, incident to any such registration, qualification or
compliance, or based on any omission (or alleged omission) to state therein a
material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances in which they were made,
not misleading, or any violation or any alleged violation by the Company of
any rule or regulation promulgated under the Securities Act or the Exchange
Act or any state securities law applicable to the Company in connection with
any such registration, qualification or compliance, and the Company will
reimburse each such Holder, each of its officers and directors, and each
person controlling such Holder, for any legal and any other expenses
reasonably incurred in connection with investigating, preparing or defending
any such claim, loss, damage, liability or action, as such expenses are
incurred, provided that the Company will not be liable in any such case to
the extent that any such claim, loss, damage, liability or expense arises out
of or is based on any untrue statement or omission or alleged untrue
statement or omission, made in reliance upon and in conformity with written
information furnished to the Company by an instrument duly executed by such
Holder or controlling person and stated to be specifically for use therein.
(ii) The Holder will indemnify the Company, each of its directors and
officers, and each person who controls the Company within the meaning of
Section 15 of the Securities Act against all claims, losses, damages and
liabilities (or actions in respect thereof) arising out of or based on any
untrue statement (or alleged untrue statement) of a material fact contained
in any such registration statement, prospectus, offering circular or other
document, or any omission (or alleged omission) to state therein a material
fact required to be stated therein or necessary to make the statements
therein not misleading, and will reimburse the Company, such directors,
officers or control persons for any legal or any other expenses reasonably
incurred in connection with investigating or defending any such claim, loss,
damage, liability or action, as such expenses are incurred, in each case to
the extent, but only to the extent, that such untrue statement (or alleged
untrue statement) or omission (or alleged omission) is made in such
registration statement, prospectus, offering circular or other document in
reliance upon and in conformity with written information furnished to the
Company by an instrument duly executed by such Holder and stated to be
specifically for use therein.
<PAGE>
Socket Communications, Inc.
Subordinated Convertible
Promissory Note
Page 5
6. RIGHT OF PARTICIPATION. Upon the first (and only the first) offering
(or series of related offerings in any 90-day period) by the Company
subsequent to the date hereof of any shares of, or securities convertible
into or exercisable for any shares of, any class of its capital stock
("SECURITIES"), the Company shall offer to the Holder and each of its
affiliates that holds a Subordinated Convertible Promissory Note issued by
the Company (collectively, the "AFFILIATED HOLDERS") the option to purchase
up to an aggregate of $2,000,000 worth of the offered Securities not to
exceed 50% of the offering (the "AFFILIATED HOLDER MAXIMUM"), in accordance
with the following provisions:
(a) The company shall deliver a notice to the Holder stating (i) its
bona fide intention to offer such Securities, (ii) the number of such
Securities to be offered, (iii) the price, if any, for which it proposes to
offer such Securities, and (iv) the terms of such offer. The Holder will
distribute this notice to the other Affiliated Holders, and the Affiliated
Holders will apportion the Affiliated Holder Maximum amongst themselves as
they see fit.
(b) Within fifteen (15) calendar days after receipt of the Notice, the
Holder will notify the Company of the portion of the Affiliated Holder
Maximum that the Affiliated Holders wish to purchase, along with a detailed
list of the apportionment of such Affiliated Holder maximum amongst the
Affiliated Holders.
(c) The right of participation in this Section 6 shall not be
applicable (i) to the issuance or sale of shares of capital stock (or options
therefor) to employees, officers, directors or consultants for the primary
purpose of soliciting or retaining their services, (ii) to the issuance or
sale of the Company's securities to leasing entities or financial
institutions in connection with commercial leasing or borrowing transactions,
or (iii) to conversions of convertible securities.
7. REPRESENTATIONS AND WARRANTIES OF HOLDER. By its acceptance hereof,
Holder represents and warrants to Company that:
(a) Holder has been advised and acknowledges: (i) that this Note and
the Common Stock of the Company issuable upon conversion of the Note (with
the Note and such Common Stock being hereinafter referred to as the
"SECURITIES") have not been, and when issued, will not be registered under
the Securities Act, the securities laws of any state of the United States or
the securities laws of any other country; (ii) that in issuing and selling
the Securities to Holder pursuant hereto, the Company is relying upon the
"safe harbor" provided by Regulation S and/or on Section 4(2) under the
Securities Act; (iii) that it is a condition to the availability of the
Regulation S safe harbor that the Securities not be offered or sold in the
United States or to a U.S. Person until the expiration of a period of 40 days
following the issuance of such Securities; (iv) that, notwithstanding the
foregoing, prior to the expiration of 40 days after the issuance of such
Securities (the "RESTRICTED PERIOD"), the Securities may be offered and sold
by the holder thereof solely either: (A) if the offer or sale is within the
United States or to or for the account of a U.S. Person (as such terms are
defined in Regulation S), the securities are offered and sold pursuant to an
effective registration statement or pursuant to Rule 144 under the Securities
Act or pursuant to an exemption from the registration requirements of the
Securities Act; or (B) the offer and sale is outside the United States and to
other than a U.S. Person. The foregoing restrictions are binding upon
subsequent transferees of the Securities, except for transferees pursuant to
an effective registration statement. After the Restricted Period, the
Securities may be offered or sold within the United States or to or for the
account of a U.S. Person only pursuant to applicable securities laws.
<PAGE>
Socket Communications, Inc.
Subordinated Convertible
Promissory Note
Page 6
(b) As used herein, the term "United States" means and includes the
United States of America, its territories and possessions, any State of the
United States, and the District of Columbia, and the term "U.S. Person" (as
defined in Regulation S) means: (i) a natural person (regardless of
citizenship) resident in the United States; (ii) any partnership or
corporation organized or incorporated under the laws of the United States;
(iii) any estate or trust of which any executor, administrator or trustee is
a U.S. Person; (iv) any agency or branch of a foreign entity located in the
United States; (v) any nondiscretionary account or similar account (other
than an estate or trust) held by a dealer or other fiduciary for the benefit
or account of a U.S. Person (whether or not the dealer or other fiduciary is
a U.S. Person); (vi) any discretionary account or similar account (other than
an estate or trust) held by a dealer or other fiduciary organized,
incorporated and (if an individual) resident in the United Stats; and (vii) a
corporation or partnership organized under the laws of any jurisdiction other
than the United States by a U.S. Person principally for the purpose of
investing in securities that have not been registered under the Securities
Act, unless organized or incorporated and owned entirely by accredited
investors (as defined in Rule 501(a) under the Securities Act) who are not
natural persons, estates or trusts.
(c) Holder agrees that with respect to the Securities until the
expiration of the Restricted Period: (i) Holder, its agents or
representatives have not and will not solicit offers to buy, offer for sale
or sell any of the Securities, or any beneficial interest therein in the
United States or to or for the account of a U.S. Person during the Restricted
Period; and (ii) that, notwithstanding the foregoing, prior to the expiration
of the Restricted Period, the Securities may be offered and sold by the
holder thereof either: (A) if the offer or sale is within the United States
or to or for the account of a U.S. Person (as such terms are defined in
Regulation S), the securities are offered and sold pursuant to an effective
registration statement or pursuant to Rule 144 under the Securities Act or
pursuant to an exemption from the requirements of the Securities Act; or (B)
the offer and sale is outside the United States and to other than a U.S.
Person. The foregoing restrictions are binding upon subsequent transferees
of the Securities, except for transferees pursuant to an effective
registration statement. Holder agrees that after the Restricted Period, the
Securities may be offered or sold within the United States or to or for the
account of a U.S. Person only pursuant to applicable securities laws.
(d) Holder has not engaged, nor is it aware that any party has engaged,
and Holder will not engage or cause any third party to engage in any directed
selling efforts (as such term is defined in Regulation S) in the United
States with respect to the Securities.
(e) Holder (i) is domiciled and has its principal place of business
outside the United States, (ii) certifies it is not a U.S. Person and is not
acquiring the securities for the account or benefit of any U.S. Person, and
(iii) any persons acting on Holder's behalf in connection therewith will be
located outside the United States.
(f) Holder is acquiring the Securities either: (i) for its own account;
or (ii) for the account and benefit of clients of whom none is a U.S. Person
and for whom Holder has, and for the entire Restricted Period will continue
to have, full investment discretion with respect to the purchase, holding and
disposition of the Securities.
(g) Holder is not a "distributor" (as defined in Regulation S) or a
"dealer" (as defined in the Securities Act).
(h) By reason of Holder's business or financial experience, or that of
the Holder's professional advisor, Holder has the capacity to protect
Holder's own interests in connection with the acquisition of the
<PAGE>
Socket Communications, Inc.
Subordinated Convertible
Promissory Note
Page 7
Securities and has the ability to bear the economic risk (including the risk
of total loss) of Holder's investment.
(i) Holder further covenants that Holder will not make any sale,
transfer or other disposition of the Securities in violation of the
Securities Act, the Securities and Exchange Act of 1934, as amended (the
"EXCHANGE ACT"), or the rules of the Securities and Exchange Commission
promulgated under the Securities Act or the Exchange Act.
(j) Holder covenants that Holder will sell, transfer or otherwise
dispose of the Securities only in a manner consistent with such Holder's
representations and covenants set forth in this Section 7. In connection
therewith, Holder acknowledges that, upon issuance of the shares of Common
Stock of the Company upon conversion of this Note, the Company shall make a
notation in its stock books regarding the restrictions on transfer set forth
in this Section 7 and shall transfer such shares on the books of the Company
only to the extent not inconsistent therewith.
(k) Holder acknowledges that Company has given Holder access to all
documents and other information required for Holder to make an informed
decision with respect to the acceptance of the Securities. In this regard,
Holder acknowledges that it has received and reviewed, among other things,
the following documents filed by the Company with the Securities and Exchange
Commission: (i) the Company's Quarterly Report on Form 10-QSB for the
quarters ended March 31, 1997 and June 30, 1997 and (ii) the Company's Annual
Report on Form 10-KSB for the year ended December 31, 1996.
8. ATTORNEYS' FEES. If the indebtedness represented by this Note or any
part thereof is collected in bankruptcy, receivership or other judicial
proceedings or if this Note is placed in the hands of attorneys for
collection after default, Company agrees to pay, in addition to the principal
and interest payable hereunder, reasonable attorneys' fees and costs incurred
by Holder.
9. NOTICES. Except as otherwise provided herein, all notices, requests,
demands, consents, instructions or other communications to or upon the
Company or Holder hereunder shall be by telecopy or in writing and
telecopied, mailed or delivered to each party at telecopier number or its
address set forth below (or to such other telecopy number or address as the
recipient of any notice shall have notified the other in writing). All such
notices and communications shall be effective (a) when sent by Federal
Express or other overnight service of recognized standing, on the business
day following the deposit with such service (if sent to an address in the
same country as the sender) or on the third business day following the
deposit with such service (if sent to an address in a different country from
the sender); (b) through the United States Postal Service, upon receipt; (c)
when delivered by hand, upon delivery; and (d) when telecopied, upon
confirmation of receipt.
HOLDER: _____________________________
_____________________________
_____________________________
_____________________________
Attention: __________________
___________________ (telephone)
___________________ (telecopy)
<PAGE>
Socket Communications, Inc.
Subordinated Convertible
Promissory Note
Page 8
COMPANY: Socket Communications, Inc.
37400 Central Court
Newark, CA 94560
Attention: Chief Financial Officer
(415) 744-2700 (telephone)
(415) 744-2727 (telecopy)
10. ACCELERATION. This Note shall become immediately due and payable (a)
upon an Event of Default, (b) if the Company commences any proceeding in
bankruptcy or for dissolution, liquidation, winding-up, composition or other
relief under state or federal bankruptcy laws, or (c) if such proceedings are
commenced against the Company, or a receiver or trustee is appointed for the
Company or a substantial part of its property, and such proceeding or
appointment is not dismissed or discharged within 60 days after its
commencement.
11. WAIVERS. Company hereby waives presentment, demand for performance,
notice of non-performance, protest, notice of protest and notice of dishonor.
No delay on the part of Holder in exercising any right hereunder shall
operate as a waiver of such right or any other right.
12. PAYMENT. Payment shall be made in lawful tender of the United States.
13. USURY. In the event any interest is paid on this Note which is deemed
to be in excess of the then legal maximum rate, then that portion of the
interest payment representing an amount in excess of the then legal maximum
rate shall be deemed a payment of principal and applied against the principal
of this Note.
14. GOVERNING LAW. This Note and all actions arising out of or in
connection with this Note shall be governed by and construed in accordance
with the laws of the State of California, without regard to the conflicts of
law provisions of the State of California or of any other state or country.
15. SUCCESSORS AND ASSIGNS.
(a) The rights and obligations of the Company and the Holder of this
Note shall be binding upon and benefit the successors, assigns, heirs,
administrators and transferees of the parties.
(b) Holder shall not transfer this Note without the prior written
consent of Company, except that Holder may transfer the Note without such
prior written consent to a collection agency following an Event of Default.
<PAGE>
Socket Communications, Inc.
Subordinated Convertible
Promissory Note
Page 9
(c) Neither this Note nor any of the rights, interests or obligations
hereunder may be assigned, by operation of law or otherwise, in whole or in
part, by Company without the prior written consent of the Holder except in
connection with an assignment in whole to a successor corporation to Company,
provided that such successor corporation acquires all or substantially all of
Company's property and assets and Holder's rights hereunder and under the
Security Agreement are not impaired.
SOCKET COMMUNICATIONS, INC.
Signature: _________________________
Name: ______________________________
Title: _____________________________
Date: ______________________________
Agreed and Accepted:
Signature: _________________________
Name: ______________________________
Title: _____________________________
Date: ______________________________
<PAGE>
EXHIBIT J
LETTER OF INTENT TO COOPERATE IN A WIRELESS JOINT VENTURE
This Letter of Intent is made and entered into as of this 10th day of
December 1997 by and between Cetronic AB, Kungsholms Strand 147, 114 28
Stockholm, SWEDEN ("CETRONIC") and Socket Communications, Inc., 37400 Central
Court, Newark, California 94560, USA ("SOCKET").
RECITALS
WHEREAS, CETRONIC and SOCKET are collaborating and working together on
developing three wireless business Products under terms of Development,
Manufacturing and Distribution Agreements covering the Radio Card dated October
1, 1996, the Compact Flash Wireless Messaging Receiver dated September 23, 1997
and the Mobile Data Information Server dated September 23, 1997;
WHEREAS, CETRONIC and SOCKET have developed other hardware and software products
related to and used with these Products and have developed know-how and
relationships important to the success of the wireless business;
WHEREAS, CETRONIC and SOCKET wish to combine the intellectual property and
assets associated with its wireless business into a new joint venture so as to
fully exploit the wireless business opportunity;
LETTER OF INTENT
NOW THEREFORE, in consideration of the premises hereof, the parties do hereby
agree as follows:
Socket Communications, Inc. and Cetronic AB intend to cooperate in a new joint
venture. Each Company will contribute the intellectual property and transfer
the assets associated with its wireless business. The objective of the new
entity is to fully exploit the wireless business opportunity. Details of the
arrangement will be worked out over the next ninety days, subject to approval of
the boards of directors of both companies.
IN WITNESS WHEREOF, the parties have duly executed this Letter of Intent as of
the 10th day of December 1997.
CETRONIC AB SOCKET COMMUNICATIONS, INC.
By: /s/ Kurt Sjoblom By: /s/ Charlie Bass
------------------------ ------------------------
Name: Kurt Sjoblom Name: Charlie Bass
Title: Director Title: Chairman
